Dream Global to buy $903M Dutch prop­er­ties, raise $300M

Dream Global Real Es­tate In­vest­ment Trust plans to buy 135 of­fice and light in­dus­trial prop­er­ties in the Nether­lands for $903-mil­lion. The REIT has also ar­ranged a $300-mil­lion bought deal. It also plans to com­plete a $544.3-mil­lion fi­nanc­ing in Europe.

Stockwatch Daily - - FRONT PAGE - Ms. Jane Ga­van re­ports

DREAM GLOBAL Real Es­tate In­vest­ment Trust has en­tered into a bind­ing sale and pur­chase agree­ment re­lat­ing to a port­fo­lio of 135 of­fice and light in­dus­trial prop­er­ties lo­cated in the Nether­lands. The to­tal pur­chase price for the trans­ac­tion is ap­prox­i­mately 622.1 mil­lion euros ($903-mil­lion), rep­re­sent­ing a go­ing-in cap­i­tal­iza­tion rate of 8 per cent. The ven­dors for the trans­ac­tion are TPG Real Es­tate, TPG Sixth Street Part­ners and Pa­tron Cap­i­tal Part­ners. The Dutch as­sets are cur­rently op­er­ated un­der the name Merin.

Trans­ac­tion port­fo­lio over­view

The trans­ac­tion port­fo­lio con­sists of 135 prop­er­ties (ap­prox­i­mately 7.7 mil­lion square feet of GLA) that are com­ple­men­tary to the REIT’s ex­ist­ing port­fo­lio and are well di­ver­si­fied by as­set type, ge­og­ra­phy and size. The of­fice port­fo­lio con­sists of 101 prop­er­ties, or ap­prox­i­mately 4.8 mil­lion square feet of GLA, and the in­dus­trial port­fo­lio con­sists of 34 prop­er­ties, or ap­prox­i­mately 2.9 mil­lion square feet of GLA.

The trans­ac­tion port­fo­lio has a to­tal prop­erty gross as­set value of ap­prox­i­mately 622.1 mil­lion euros ($903-mil­lion), of which ap­prox­i­mately 502 mil­lion euros ($728.7-mil­lion) of gross as­set value con­sists of the of­fice port­fo­lio and ap­prox­i­mately 120 mil­lion euros ($174.2-mil­lion) of gross as­set value con­sists of the in­dus­trial port­fo­lio.

The over­all oc­cu­pancy of the trans­ac­tion port­fo­lio is cur­rently 82 per cent, and the trans­ac­tion port­fo­lio cur­rently in­cludes 734 tenants with a weighted av­er­age lease term of 4.1 years.

The bal­ance of the trans­ac­tion port­fo­lio con­sists of value-add prop­er­ties that are be­ing repo­si­tioned to drive NOI growth and in­crease value through oc­cu­pancy and rental rate in­creases. In ad­di­tion, the REIT has iden­ti­fied cer­tain prop­er­ties that it in­tends to sell over the next 12 to 18 months.

The Merin man­age­ment team, led by Mr. van Holten, is com­ple­men­tary to the REIT’s ex­ist­ing Euro­pean plat­form and will add scale and ex­per­tise across the real es­tate value chain. Eq­uity of­fer­ing

To pro­vide par­tial fi­nanc­ing for the trans­ac­tion, the REIT has en­tered into an agree­ment to sell, on a bought deal ba­sis in each of the prov­inces of Canada, 28,575,000 units of the REIT at a price of $10.50 per unit, to a syn­di­cate of un­der­writ­ers. The to­tal gross pro­ceeds of the eq­uity of­fer­ing will be $300-mil­lion. The REIT has granted the un­der­writ­ers an over­al­lot­ment op­tion to pur­chase up to an ad­di­tional 4,286,250 units, ex­er­cis­able in whole or in part for a pe­riod of 30 days fol­low­ing the clos­ing of the eq­uity of­fer­ing. If the over­al­lot­ment op­tion is ex­er­cised in full, the gross pro­ceeds of the eq­uity of­fer­ing will to­tal ap­prox­i­mately $345-mil­lion.

Euro­pean debt of­fer­ing

The REIT has ob­tained com­mit­ted fi­nanc­ing from Mor­gan Stan­ley and will launch an ex­pected 375-mil­lion-euro ($544.3-mil­lion) Euro­pean of­fer­ing of se­nior un­se­cured notes. The notes will have a fixed in­ter­est rate and an ex­pected term of 4.4 years. The fi­nal terms of the notes, in­clud­ing the in­ter­est rate and the is­sue price, will be an­nounced fol­low­ing the con­clu­sion of book­build­ing.

Ven­dor units

The REIT has agreed to sat­isfy 60 mil­lion euros ($87.1-mil­lion) of the pur­chase price for the trans­ac­tion through the is­suance of units to the ven­dors, on a pri­vate place­ment ba­sis, at an agreed-upon value equal to the clos­ing price per unit on the date of this an­nounce­ment. The ven­dors have agreed not to sell any units of the REIT for a pe­riod of six months from the clos­ing of the trans­ac­tion.

“We be­lieve this trans­ac­tion will mean­ing­fully im­prove the REIT’s pay­out ra­tio and cap­i­tal struc­ture,” said Tamara Law­son, chief fi­nan­cial of­fi­cer of Dream Global REIT. “The term of the un­se­cured debt of­fer­ing com­ple­ments our ex­ist­ing debt ma­tu­ri­ties very well, and the all-in coupon rate is ex­pected to com­pare favourably to the un­se­cured deben­ture rates for REITs in Canada.”

We seek Safe Har­bor.

Erika Flores con­densed this news re­lease (erikaf@stock­watch.com).

R Sacha Bha­tia, Detlef Bier­baum, Michael J Cooper, P Jane Ga­van, Dun­can New­ton Row­ell Jack­man, John Michael Arthur Knowl­ton, Jo­hann Olav Koss, John Sul­li­van

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