Singapore’s GIC, Dream Industrial to buy Summit REIT for .9 billion

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Singapore’s sovereign wealth fund, GIC, and Dream Industrial REIT are teaming up to buy Summit Industrial Income REIT for $5.9 billion in an all-cash transaction as part of play on the booming industrial real estate sector.

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The new arrangement will see GIC own 90 per cent of a joint venture vehicle while Dream will hold the remaining 10 per cent. The venture will be managed by Dream Asset Management.

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Summit unitholders will receive a cash distribution of $23.50 per unit in the form of a special distribution and a redemption of units, which represents a premium of 31.1 per cent over Summit’s closing unit price on Nov. 4, 2022.

Summit recommended that unitholders vote in favour of the transaction after determining it served the best interests of REIT unitholders.

“We are pleased to provide an immediate and certain premium value to our unitholders through this all-cash transaction with GIC and Dream,” Paul Dykeman, Summit chief executive said in a media release. “We are confident this transaction is in the best interest of the REIT and unitholders.”

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“Supply has not been able to grow to keep up with the demand in Canadian industrial leads,” Tsichlas said in an interview. “The current in-place rents are significantly below estimated current market rents. So, that provides a lot of buffer when leases mature and then also a buffer if there are recessionary forces that cause less demand in the near future.”

Matt Kornack, an analyst at National Bank of Canada Financial Markets, said that while the deal made sense on some levels, he also had some reservations on the valuation.

“It’s a logical acquisition, the pricing is reflective of how strong the Canadian markets are,” Kornack said. “From a valuation standpoint, it doesn’t 100 per cent make sense for Dream Industrial, but with the property management fees that they’re going to generate from GIC on the 90 per cent that they don’t own, that helps to kind of get them to a point where they can make the numbers work to buy a good quality portfolio.”

Upon approval of the Summit deal, Michael Cooper, founder of Dream Group of Companies, and trustee of Dream Industrial REIT will become the manager of the venture.

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