Singaporean Sovereign Wealth Capital Backs Summit Industrial Income REIT Acquisition
Posted on 11/07/2022
In recent years, the Canadian industrial market has experienced record low-vacancy levels and record-high market rent growth rates. Dream Industrial Real Estate Investment Trust (TSX: DIR.UN) partnered with Singapore’s GIC Private Limited to form a joint venture to acquire Summit Industrial Income REIT. The Canadian Industrial joint venture will be 10% owned by Dream Industrial Real Estate Investment Trust and 90% owned by GIC.
The acquisition is an all-cash transaction valued at approximately C$ 5.9 billion.
GIC and Dream Industrial Real Estate Investment Trust have agreed to pursue additional acquisition opportunities in major industrial markets in Canada through a programmatic joint venture arrangement.
Over 99% of Summit properties are located in geographies where Dream Industrial Real Estate Investment Trust already operates. The combined portfolios are focused on logistics and warehousing assets in Canada’s largest urban markets, with approximately 60% of total GLA concentrated in the Greater Toronto and Montreal Areas.
Operations
A subsidiary of Dream Asset Management Corporation (DAM) will be the asset manager for the Canadian Industrial JV, and DIR’s interest in the Canadian Industrial JV will be managed under the same terms as its current asset management agreement with DAM. DIR is expected to provide property management and accounting, construction management, and leasing services to the joint ventures at market rates, providing a meaningful income stream immediately upon closing and is expected to grow organically through driving higher revenue from the existing Summit properties, and as the Canadian Industrial JV deploys its committed capital on new acquisition opportunities.
Dream Industrial Real Estate Investment Trust intends to fund its proportion of equity for the Summit Acquisition via a combination of Canadian and euro-equivalent unsecured debt, including 1) a new C$200 million, 3-year bilateral term loan fully committed by The Toronto-Dominion Bank; 2) an upsizing of its existing euro-equivalent, USD term loan from US$150 million to US$250 million and swapping the proceeds to euro-equivalent debt; and 3) the remainder through utilizing DIR’s revolving line of credit. Concurrent with the upsizing of the USD term loan, DIR will be extending its maturity date from 2024 to 2025. As disclosed in its third quarter 2022 results, DIR has also closed the successful upsizing of its revolving line of credit from C$350 million to C$500 million.
Board and Special Committee Approvals
To evaluate the establishment of the Canadian Industrial JV, the DIR Board of Trustees established an independent special committee (the “Special Committee”). The Special Committee is comprised of 3 independent trustees and is being chaired by Dr. R. Sacha Bhatia.
Scotiabank is acting as independent financial advisor and Goodmans LLP is acting as independent legal counsel to the Special Committee.
The establishment of the Canadian Industrial JV and the Summit Acquisition has been unanimously approved by the Special Committee and DIR’s Board of Trustees.
Advisors to the Canadian Industrial JV
TD Securities is acting as exclusive financial advisor to the Canadian Industrial JV and Osler, Hoskin & Harcourt LLP and Stikeman Elliott LLP are acting as legal counsel to DIR and GIC, respectively. CBRE is acting as real estate advisor to the Canadian Industrial JV. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to GIC. King & Spalding LLP is acting as US legal counsel to DIR in connection with the joint venture arrangements.
BMO Capital Markets is acting as exclusive financial advisor to Summit and has provided the Board of Trustees with a fairness opinion in respect of the Transaction. McCarthy Tétrault LLP is acting as legal counsel to Summit.
