Blackstone acquires Dream Global Real Estate Investment Trust for $4.7bn

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Blackstone Group has acquired Canadian real estate trust Dream Global Real Estate Investment Trust for US$4.7bn, including debt, and its portfolio of real estate assets in Germany and the Netherlands, in an all-cash deal.

The New York-based private equity firm agreed to pay C$16.79 a share in cash for Dream Global Real Estate Investment Trust, which operates offices and industrial properties in Western Europe. The offer was 19% higher than Dream Global’s closing price on 13 September on the TSX, two days before the announcement.

Dream Global’s real estate assets are mainly located in Germany’s Big 7 and the Netherlands and are likely to be absorbed into some of Blackstone’s existing funds.

‘We are delighted to be acquiring Dream Global, a high-quality and diversified portfolio of office and logistics assets in Western Europe, which has been created by Dream over the last eight years,’ said James Seppala, head of Blackstone Real Estate Europe. ‘This transaction is an exciting opportunity for Blackstone to expand its existing office and logistics portfolios in some of the largest and most important markets in the region.’

The deal comes less than a week after Blackstone raised $20.5bn for its largest real estate fund to date, Blackstone Real Estate Partners IX, which also has the remit to invest in Germany.

‘There is still plenty of capital around, both equity and debt,’ said Tim Horrocks, head of real estate for Continental Europe at Nuveen Real Estate. ‘We just have to look at the recent news of the closure of the biggest real estate fund-raising ever to see that investors are still attracted to the asset class.’

Or, as one analyst put it: ‘Blackstone is a fund raising machine and they have capital they need to place. They are large and very smart and where they go, others will follow.’

For Detlef Bierbaum, chairman of Dream Global's board of trustees, this transaction ‘is the culmination of the tremendous growth that Dream Global has achieved since its 2011 IPO’: ‘At a time when the Western European real estate market is becoming increasingly competitive, this transaction provides premium value to unit holders. Upon completion of the transaction, Dream Global will have increased its equity market capitalization by nearly eight times and will have delivered total annualized returns of 15% to our unit holders, since inception, which exceed both the Canadian and European REIT benchmarks by approximately 60%,’ he added.

In 2011, Dream created a public business to invest in European real estate, acquiring a $1bn portfolio of 292 properties, consisting mostly of German post offices, to establish a European platform. The portfolio was funded in part through the $470m IPO of Dream Global, in which Dream invested $120m. Since the IPO, Dream Global has sold over 200 of the original assets and transformed itself into a portfolio of Core+ office assets in Germany, Austria, Belgium and the Netherlands, as well as light industrial and development.

Toronto-Dominion Bank and National Bank of Canada were the financial advisers on the deal, which will be subject to the approval of at least 66 2/3% of the votes cast by unit holders at a special meeting. A date has not yet been announced for the vote. The transaction is subject to other customary conditions, including regulatory approvals, and is expected to close in December 2019.

TD Securities is acting as financial advisor to Dream Global. Osler, Hoskin & Harcourt LLP and Greenberg Traurig Germany LLP are also acting as legal counsel to Dream Global. National Bank Financial is acting as financial advisor to the Special Committee. Goodmans LLP is acting as legal counsel to the Special Committee in connection with the Transaction. RBC Capital Markets, BNP Paribas, and Deutsche Bank Securities Inc. are acting as financial advisors to Blackstone. Davies Ward Phillips & Vineberg LLP and Simpson Thacher & Bartlett LLP are acting as legal counsel to Blackstone.

Blackstone has $545bn in AUM, include investment vehicles focused on private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds, on a global basis.