Summit Industrial Income REIT has agreed to be purchased for 5.9 billion in Canadian dollars by rival Dream Industrial and Singapore sovereign wealth fund GIC in a cash deal that works out to be about 31% more than the recent price of the publicly traded stock.

The deal, which doubles Dream's size in Canada, would be the country's largest since the $5.7 billion transaction for Quebec City, based Cominar REIT in 2021.

Unitholders of Toronto-based Summit REIT, one of the largest industrial landlords in the country with a portfolio of 158 properties, are being paid $23.50 Canadian through a special distribution and redemption of units. The REIT's units closed at $17.93 Friday.

The move lets Summit provide an "immediate and certain premium value to our unitholders through this all cash transaction with GIC and Dream,' said Paul Dykeman, chief executive of Summit, in a statement.

Trustees and executive officers of the REIT, who hold approximately 6.9% of the issued and outstanding units, have entered into agreements to vote in favour of the transaction.

It is essentially the second time the backers of what is known informally as Summit II have taken their company public only to sell eventually. In 2006, Summit Real Estate Investment Trust agreed to a $2.1-billion all-cash sale to ING Real Estate, a unit of Netherlands-based ING Groep NV.

Summit Industrial Income REIT, or Summit II, went public with an initial public offering in 2013. Lou Maroun, the chief executive of the first Summit REIT, is chairman of Summit II. Dykeman was the former chief financial officer of the original REIT.

GIC is one of the three investment entities in Singapore that manage the government's reserves and had 690 billion in U.S. dollars under management as of June 2022.

The deal brings "GIC's expertise in real estate investing and Dream's 25 years of experience as a world-class real estate developer, owner and asset manager. Through our partnership, Summit's assets will be positioned for continued success," said Lee Kok Sun, chief investment officer of real estate with GIC, in a statement.

Under the terms of the deal, a joint venture would be created for the Summit portfolio, which would be 90% controlled by GIC and 10% by Dream Industrial. A subsidiary of Dream Asset Management, a sister company of Dream Industrial, would be the asset manager for the portfolio.

"Summit has a premier portfolio of industrial properties defined by strong sector fundamentals, resilient cash flows, and stable market rent growth in key markets across Canada," said Adam Gallistel, head of Americas real estate with GIC. "This is another strong addition to GIC's global real estate portfolio."

Dream Industrial, which will have $470 million in equity in the deal, and GIC have signaled their intentions to continue to expand the Summit portfolio, now situated across five Canadian provinces.

Dream Industrial, part of the Dream Unlimited group of companies, went public with an IPO in 2012 and operates a portfolio of 258 industrial assets totaling approximately 46.5 million square feet of gross leasable area across Canada, Europe, and the United States.

"Summit's business fits perfectly with Dream's experience and management expertise, and we look forward to partnering with GIC," said Michael Cooper, founder of the Dream Group of Companies and trustee Dream Industrial REIT, in a statement.

The deal, slated to close in the first quarter of 2023, would give Dream one of the largest managed portfolios of industrial assets in Canada, with 43 million square feet and expansion opportunities. Upon closing the acquisition, the REIT would manage approximately 69 million square feet in Canada, the United States, and Europe.

"Combining with Summit will add scale and quality to our Canadian platform and amplify our fee-generation business," said Brian Pauls, chief executive of Dream Industrial in a statement.

Amid rising interest rates, real estate company CBRE reported that even the seemingly bulletproof industrial class backed by strong e-commerce demand is seeing a rise in capitalization rates.

"Despite yields expanding for a second consecutive quarter, industrial cap rates still remain 33 basis points below their pre-pandemic levels," said CBRE, putting the national average Class A and B series cap rate up 25 basis points to 5.23% from the second quarter.

In a release, Dream said the strategic rationale for the deal was significantly growing its exposure to the Canadian industrial market through a complementary portfolio.

"In recent years, Dream Industrial has successfully expanded to the U.S. and Europe in addition to Canada, with public and private capital, by pursuing innovative structures and financing strategies to fuel its growth and transform its portfolio," said Alexander Sannikov, chief operating officer, of Dream Industrial, in a statement.

BMO Capital Markets is acting as the exclusive financial adviser to Summit on the deal. McCarthy Tétrault LLP is acting as legal counsel to Summit.

TD Securities is acting as the exclusive financial adviser to the joint venture. Osler, Hoskin & Harcourt LLP, and Stikeman Elliott LLP is acting as legal counsel to Dream Industrial and GIC. CBRE is acting as a real estate adviser to the joint venture.