Morgan Properties Pays to Take Dream Residential Private

A Canadian real estate investment trust is going private after being bought by an American apartment giant.

Pennsylvania-based Morgan Properties has reached a deal to pay $10.80 per share to take a majority stake in Toronto-based Dream Residential REIT, Bisnow reported. The all-cash transaction works out to about $354 million.

The deal is expected to close by the end of the year. Dream’s board of directors has given its full support for the move, but shareholders still have to approve the plan, which has yet to go through standard regulatory approval.

Dream REIT’s monthly distribution will be suspended after November unless the deal hasn’t closed by Nov. 18, in which case it will pay one more monthly distribution. If Morgan Properties walks away from the deal, it will have to pay $8.6 million. Dream would have to fork over a $25 million reverse termination fee if it backs out. Once the deal is closed, Dream affiliates will no longer act as external asset managers in exchange for $7 million.

Dream went public on the Toronto Stock Exchange in May 2022, but its per-share stock price never reached its $13 target. In February, the REIT announced it was undergoing a strategic review of operations, which could include a potential sale. Over the past year, Dream’s stock price has risen more than 60 percent, likely due to the behind-the-scenes restructuring. After news of the deal broke, the stock increased more than 17 percent.

Several other REITs have announced similar strategic reviews of operations. This could mean that mergers, sales and management changes at these firms might be coming down the pike. So far this year, the Dow Jones Equity All REIT index has been pretty much flat with a less than 0.1 percent decrease in price return; by contrast, the Dow Jones Industrial Average is up more than 5 percent this year.

Morgan Properties owns or manages more than 100,000 units across 22 states. Dream Residential owns a portfolio of 15 garden-style apartment complexes consisting of 3,300 units in Dallas, Cincinnati, Oklahoma City and Tulsa. Morgan’s purchase breaks down to about $107,000 per unit.

— Chris Malone Méndez