Morgan Properties To Buy Canada's Dream Residential For $354M
Dream Residential REIT has reached a roughly $354M deal to go private.
Pennsylvania-based Morgan Properties, an investment firm that owns or manages over 100,000 units in 22 states, agreed to pay $10.80 per share to take over Dream a little more than three years after the REIT went public.
The all-cash transaction would give shareholders a 60% premium on the stock’s price when the REIT's management announced it was undergoing a strategic review of operations in February. The stock jumped more than 17% on the news Thursday to just under the buyout price.
“We are pleased to conclude our Strategic Review with a Transaction that delivers immediate value to our Unitholders and supports the underlying value of the REIT’s real estate,” Dream CEO Brian Pauls said in a statement.
The deal is expected to close before the end of the year. It has unanimous support from Dream’s board of directors, but shareholders still have to approve the plan, which is also subject to the standard regulatory approval.
Dream plans to suspend its monthly distribution after November unless the deal fails to close by Nov. 18, at which point it will pay one additional monthly distribution. Morgan Properties will pay $8.6M if it walks away from the deal, while Dream faces a $25M reverse termination fee.
Dream affiliates will also stop acting as external asset managers at the close of the deal, taking a $7M payout to settle the termination of any service agreements.
Toronto-based Dream owns a portfolio of 15 garden-style apartment complexes with 3,300 keys in Dallas, Cincinnati, Oklahoma City and Tulsa, Oklahoma. The properties have an average age of 40 years, and Morgan will purchase them for roughly $107K per door.
Dream’s initial public offering in May 2022 was met with lackluster demand on Wall Street, and the stock never reached its target $13 share price. It has climbed more than 60% over the last 12 months, driven by the bumps from the strategic review and proposed sale.
REITs, including Dream, have been looking for ways to maximize shareholder returns amid widespread share price discounts compared to net asset values.
At least a half-dozen REITs have announced similar reviews of strategic alternatives in recent months, which may portend a wave of mergers, sales and management shake-ups.
The sector posted mostly positive results during the recent second-quarter earnings season, but equity investors have been lured away by higher returns in other corners of the market.
The Dow Jones Equity All REIT index is flat year-to-date, while the Dow Jones Industrial Average is up more than 5% in 2025.
“From a business point of view, for all intents and purposes, these companies are doing what we thought they would do. It's just not finding a home with a lot of investors,” Anthony Paolone, a senior analyst at JPMorgan Chase, told Bisnow this month.
