After announcing that it was undergoing a "strategic review" of its operations in February, Dream Residential REIT (TSX: DRR.UN) announced on Thursday morning that it has entered into an agreement to be acquired by an affiliate of Philadelphia-based Morgan Properties, which brings an end to the review.
The agreement will see Morgan Properties acquire Dream Residential REIT in an all-cash transaction valued at approximately $354 million USD (roughly $492 million CAD).
Unitholders will each receive cash consideration of $10.80 USD per unit, which represents a premium of 60% on the closing price on February 19, 2025, the day before the REIT announced the strategic review. The unit price also represents a premium of 18% on the closing price as of yesterday.
The transaction is subject to certain approvals at a special unitholder meeting, court approval, and customary closing conditions. If all goes according to plan, the transaction is expected to close in late 2025. The transaction also entails the REIT terminating its services agreement with Dream Unlimited and Pauls Realty Services, which will incur a payment of $7.0 million USD.
Dream Residential REIT will halt its monthly distribution after a final payment on November 15, although the REIT says it may pay an additional monthly distribution if the transaction has not closed by November 18.
In the event that the transaction does not close, Dream Residential REIT will pay Morgan Properties an $8.6 million USD termination fee. Morgan Properties would pay the REIT a reverse termination fee of $25.0 million if the transaction is terminated under specified circumstances.
"Following a comprehensive review, the Board has determined that the Transaction is in the best interest of the REIT," said Dream Residential REIT's Board Chair Vicky Schiff in a press release this 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."
"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," said Morgan Properties Co-Presidents Jonathan and Jason Morgan. "Our team looks forward to welcoming these new communities, enhancing the physical assets, and providing best-in-class customer service for the residents."
According to its corporate website, Morgan Properties was founded in 1985 by Mitchell Morgan and a partner when they acquired three multi-family communities in Lansdale, Pennsylvania. Mitchell Morgan then took sole ownership of the company in 1996 and renamed the company Morgan Properties.
Morgan Properties now owns over 360 properties in 22 states, a portfolio that totals more than 100,000 units. It says its vision is "To transform the housing industry and empower people to redefine their American Dream." The company also invests in multifamily common equity, commercial mortgage-backed B-Piece securities, preferred equity, and whole loans.
Although based in Canada, Dream Residential REIT's entire portfolio consists of multi-family properties in the United States. The REIT was established in 2022 and its portfolio consisted of 3,300 units across 15 properties as of February's announcement of the strategic review. Its portfolio is concentrated in the Greater Cincinnati, Oklahoma City, and Dallas-Fort Worth regions.
Serving as advisors to Dream Residential REIT in the transaction were TD Securities, Osler, Hoskin & Harcourt LLP, Clifford Chance US LLP, and Goodmans LLP, while advisors to Morgan Properties were RBC Capital Markets, Stikeman Elliott LLP, and Blank Rome LLP.
