After Dream Global sale to Blackstone, its holding company plans a pivot

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Blackstone Group Inc. is buying Dream Global REIT for $3.3-billion in cash, and as part of the deal the private equity giant is paying $395-million to end Dream Global’s asset management contract with Mr. Cooper’s holding company.

This translation has been automatically generated and has not been verified for accuracy.The sale of Dream Global Real Estate Investment Trust provides a healthy payday for Michael Cooper’s holding company as the real estate titan pivots toward private capital in a new era for the industry.

“We think that, right now, private money is beating public money in terms of its competitiveness,” he said. “Pension funds, private equity investors, high-net-worth investors, a lot of them have a much better opportunity to buy properties than public companies can.” BMO Nesbitt Burns analyst Jenny Ma calculated that Blackstone’s $3.3-billion purchase price, at $16.79 a share, equates to a 18.5-per-cent premium to Dream Global’s closing price on Friday, but it amounted to a 6.6-per-cent discount to the REIT’s net asset value.

Asset managers often earn a number of fees for their work. Typically, they make a base annual fee, calculated as a percentage of a REIT’s historical cost of assets. For Dream Global, this fee was 0.35 per cent annually. Asset managers also earn acquisition fees – often 0.5 per cent to 1 per cent of a property’s purchase price – as well as capital expenditure fees for hard construction costs.

Asked about the structure of these contracts, Mr. Cooper said Dream Global is getting rid of its own through the sale – however, he acknowledged that Dream Industrial REIT still has a contract with Dream Asset Management.

 

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