This article is from the Australian Property Journal archive
PAN Asian logistics giant ESR, which has fast become a major player in the Australian industrial market, will acquire Singapore-based ARA Asset Management to create a real estate behemoth managing $129 billion worth of assets.
ESR earlier this year partnered with Singaporean sovereign wealth fund GIC to secure Blackstone’s Milestone logistics portfolio for $3.8 billion in Australia’s largest, while ARA is the largest real estate manager in the Asia Pacific with US$95 billion and recently won the protracted and bruising battle for control of ASX-listed Cromwell Property Group.
But the key plank of the agreement is ARA’s controlling stake in Logos – itself having just headed a consortium that bought the country’s largest intermodal freight facility for $1.7 billion – and which serves as its logistics and data centre specialist and fulfils ESR’s “new economy” ambitions.
“Our vision has always been to build a leading fund manager focused on technology enabled real estate, especially logistics and more recently data centres, on the back of major secular trends including the rapid rise of e-commerce, digital transformation and the financialisation of real estate in Asia Pacific,” Jeffrey Perlman, chairman of ESR said.
ARA will be acquired for US$5.2 billion by ESR, together with OMERS and JD.com which make up all the shareholders represented on the ESR board.
Jeffrey Shen and Stuart Gibson, ESR co-founders and co-CEOs, said the group’s reach would now extend across over 95% of GDP in Asia Pacific, total new economy AUM will rise by 49% to over US$50 billion, portfolio gross floor area will increase by 44.3% to 29 million sqm and there would be US$7 billion to deploy into new logistics and data centre projects.
“The enlarged ESR Group will become APAC’s largest real estate and real asset manager powered by new economy, and the world’s third-largest listed real estate asset manager.”
Based on the financial results for 2020, over 80% of the enlarged ESR Group’s EBITDA will come from new economy real estate, while more than 50% of its AUM will come from perpetual and core capital vehicles (including 14 listed REITs).
“We are currently witnessing a ‘once in a generation’ change in real estate where leading global investors are seeking to rebalance their portfolios by divesting institutional quality assets in order to redeploy that capital back into New Economy real estate where they have been meaningfully underweight.” Perlman said.
Founded in 2002 and listed on the Singapore Stock Exchange between 2007 and 2017, ARA is the largest real asset manager in APAC and has raised over US$16 billion in equity capital since 2016, which has supported a gross transaction volume of acquisitions, divestments and development activity of almost US$20 billion during the same period.
Logos has nearly doubled its AUM over the past two years to US$17 billion, comprising over 8.9 million sqm of property either owned or under development across 26 ventures, including Singapore-listed ARA Logos Logistics Trust.
ESR said global investors are increasingly consolidating relationships towards a limited number of large-scale and professional managers, allocating more capital to a smaller roster of managers.
“The increasing average fund size – 80% of funds closed in 2020 are over US$1 billion in size – underscores the trend of larger managers gaining greater share of fund commitments. The enlarged ESR Group, as one of the largest listed real estate investment managers globally, is poised to capitalise on this trend.”
John Lim, ARA co-founder and deputy chairman, together with a representative from each of CK Asset Holdings and Sumitomo Mitsui Banking Corporation (SMBC), will be appointed to ESR’s board of directors.
SMBC will also subscribe to a US$250 million placement of new ESR shares.
