Real Estate

Blackstone seals $4.7bn deal for Dream Global Reit


Blackstone has clinched a deal to buy Canadian real estate investment trust Dream Global valuing the owner of office properties across western Europe at C$6.2bn ($4.7bn).

The all-cash takeover is the latest in a flurry of multibillion-dollar deals by Blackstone’s property arm, which closed a record $20.5bn in commitments last week. The new fundraising is the largest-ever for a real estate fund, and increases the war chest Blackstone has amassed to invest in property to more than $36bn.

Dream Global’s assets include over 200 office space and warehouse properties in more than 100 cities across western Europe, with a large presence in Germany and the Netherlands.

The acquisition adds to Blackstone’s expanding portfolio of logistics properties, which real estate co-chief executive Ken Caplan has called the private equity group’s “highest conviction” trade. 

In June, Blackstone paid $18.7bn for Singapore-based GLP’s portfolio of US warehouses, one of the company’s biggest-ever deals, in a bet on the continued shift to online shopping by consumers across the globe.

Warehouses have surged in value, fuelled by demand from retailers such as ecommerce behemoth Amazon, and dealmaking in the sector has been brisk. Earlier this year Prologis agreed to buy warehouse owner Industrial Property Trust for $4bn, while Colony Capital announced the purchase of a warehouse portfolio worth $1.2bn.

Dream Global stockholders will receive C$16.79 in cash for each share they hold, an 18.5 per cent premium to Friday’s closing stock price. The two companies expect to complete the deal by December, following a shareholder vote by the Toronto-based Reit.

“At a time when the western European real estate market is becoming increasingly competitive, this transaction provides premium value to unit holders,” said Detlef Bierbaum, the chairman of Dream Global’s board of trustee.

A nearly decade-long boom in real estate has swelled Blackstone’s property fund coffers to $154bn, making it the second-largest of the firm’s four main investment strategies after private equity. But some real estate investors see potential for turmoil as money floods into the sector from yield-hungry investors, as interest rates hover near all-time lows. 

Asset managers were sitting on almost $2.5tn of dry powder at the end of June, according to data provider Preqin. That is a record amount that has helped prop up valuations of both companies and real estate, even as global growth has cooled. 

In a recent interview Mr Caplan acknowledged that there were headwinds in the market but said he does not see a property bubble. 

“The underlying fundamentals still feel good, it’s just that we’re in a more challenging investment environment in terms of prices having gone up for several years now and yields compressing,” he said. 

James Seppala, the head of Blackstone Real Estate Europe, called Dream Global “a high-quality and diversified portfolio” that is in “some of the largest and most important markets in the region”.



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