Dream Residential REIT (DRR-U-T) has an agreement to be acquired by an affiliate of U.S.-based Morgan Properties for approximately $491 million (all figures Cdn unless noted) in an all-cash transaction.

The REIT owns a portfolio of 15 properties comprising approximately 3,300 housing units according to its website. They are located in Oklahoma, Ohio, Texas and Kentucky across the Sunbelt and Midwest regions of the United States.

“Following a comprehensive review, the board has determined that the transaction is in the best interest of the REIT,” board chair Vicky Schiff said in the announcement Thursday morning. “We are pleased with today’s announcement which will bring a successful conclusion to the REIT’s strategic review. 

“The board is unanimously recommending that unitholders vote in favour of the transaction.”

Board members and their entities control approximately 22.5 per cent of the REIT units.

Financial details of the transaction

Unitholders are to receive $15.00 per unit, representing a premium of 60 per cent to the REIT’s closing price on the TSX as of Feb. 19, the day prior to Dream Residential REIT’s announcement of a strategic review process. It represents an 18 per cent premium to the closing unit price on the TSX as of August 20.

“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,” Brian Pauls, CEO of Dream Residential REIT, said in the announcement. “The transaction provides our unitholders with liquidity and value certainty.”

The transaction remains subject to customary closing conditions, including approvals from Dream Residential’s unitholders. It is expected to close prior to the end of the year.

The REIT plans to suspend its monthly distributions following the payment on Nov. 15 of its October distribution - unless the transaction does not close in the expected time frame.

The REIT was valued at $11.80 per share when it was founded in early 2022, but the share value declined significant during 2023 to a low of $5.55, and struggled to recover. It had been trading in the $8 to $9 range since the announcement in March of the strategic review.

Dream Residential is one of four REITs which has been operating under the Dream group of companies and entities. Toronto-based Dream manages portfolios valued at approximately $28 billion across its various holdings, partnerships and affiliates.

About Morgan Properties

Morgan Properties is headquartered in the Philadelphia-area community of Conshohocken.

“The Dream Residential REIT portfolio exemplifies the type of investment opportunity Morgan Properties excels in - leveraging our strong balance sheet, proven ability to deliver execution certainty, and deep expertise in acquiring large portfolio across numerous markets,” Jonathan and Jason Morgan, co-presidents of Morgan Properties, said in the announcement. “Our team looks forward to welcoming these new communities, enhancing the physical assets, and providing best-in-class customer service for the residents.”

Established in 1985 by Mitchell Morgan, it is a national real estate investment and management company with over 2,500 employees.

Jonathan and Jason Morgan represent the next-generation leaders overseeing its business operations. The firm pursues a diversified investment strategy focusing on multifamily common equity, commercial mortgage-backed B-Piece securities, preferred equity, and whole loans. 

Morgan Properties and its affiliates own and manage a multifamily portfolio comprising over 100,000 units across more than 360 communities in 22 states. 

The company is the nation’s largest private multifamily owner and one of the top apartment owners in the country. 

The company also has investments in commercial mortgage-backed B-Piece securities backed by over US$40 billion in multifamily loans.

TD Securities is acting as financial advisor to Dream Residential REIT; Osler, Hoskin & Harcourt LLP and Clifford Chance US LLP are acting as legal counsel; and Goodmans LLP is acting as legal counsel to the REIT’s special committee struck for the review.

RBC Capital Markets is acting as financial advisor to Morgan Properties, while Stikeman Elliott LLP and Blank Rome LLP are acting as legal counsel.