Another REIT Portfolio Acquisition

Alex Dolesky - Sep 17, 2019
On Sunday, September 15th Dream Global REIT (DRG.UN) announced that it has entered into a sale agreement with Blackstone Capital.

On Sunday, September 15th Dream Global REIT (DRG.UN) announced that it has entered into a sale agreement with Blackstone Capital.

 

Under the terms of the agreement, Dream Global unitholders will receive a cash consideration of $16.79 per unit, which represents a significant premium of 18.5% to the closing price of Dream Global units on the TSX on September 13, 2019 (the last trading day prior to announcement of the transaction). This value will represent a total return for 2019 of 47%.

 

We view the agreement to be a fair price for the REIT, and believe that investors should be pleased with the outcome.

 

The transaction reflects an attractive value for Dream Global's real estate portfolio and represents a 9.1% premium to Dream Global's June 30, 2019 EPRA NAV1. Dream Global has been one of our core holdings for a number of years with the majority of clients crystallizing a gain in the 50% - 130% range (including the dividend) depending on the length of the ownership. We have been net buyers of the REIT until the day prior to the announcement.

 

The REIT takeover (being the 7th friendly acquisition among our portfolio holdings in the last 3 years) is yet another validation on our theory that publicly traded REITS not only serve as a great income producing instrument but also are a great way for achieving substantial capital appreciation by investing in undervalued assets across North America and Europe. In the case of Dream Global, these assets were comprised of properties in the Netherlands, Germany and Austria.

 

We are currently building a position in European Residential REIT (ERE.UN) as a replacement for Dream Global in our REIT portfolios.