Hong Kong-listed ESR announced Wednesday that its shareholders had approved the logistics giant’s $5.2 billion proposed acquisition of ARA Asset Management.
At an extraordinary general meeting earlier that day, 91.81 percent of votes cast were in favour of purchasing 100 percent of the equity in the Singapore-based fund manager. The deal is expected to create the largest real asset manager in Asia Pacific, and the third-largest listed real estate investment manager worldwide, with combined assets under management totalling $131 billion.
Upon completion of the transaction by the first quarter of 2022, ARA’s business — including Australian industrial developer Logos — will combine with ESR’s to form the enlarged ESR Group, driven by a new-economy real estate platform with over $50 billion in AUM and representing 80 percent of the enlarged group’s EBITDA, ESR said in a release.
“We are currently experiencing a once-in-a-generation change in real estate and the enlarged ESR Group is very well positioned to capture the largest secular trends including the continued rise of e-commerce, an accelerating digital transformation and the financialisation of real estate,” said ESR chairman Jeffrey Perlman.
Up the League Table
With ARA’s APAC real estate AUM ranked tops in the region last year at $66.9 billion, following the merger the new supersized ESR will rank seventh among all property fund managers globally, just behind America’s Nuveen and ahead of AXA Investment Managers Real Assets of France.
More than half of the enlarged group’s AUM will come from perpetual and core capital vehicles, including 14 listed REITs, further enhancing the platform’s earnings resilience and asset-light trajectory, ESR said.
In what it called a value-enhancing step for the enlarged group, ESR in October proposed the merger of ESR-REIT and ARA Logos Logistics Trust to form Singapore-listed ESR-Logos REIT with total assets of $4 billion.
By market capitalisation, ESR-Logos REIT’s S$2.5 billion free float would rank eighth on the Singapore Exchange, just behind OUE Commercial Trust and ahead of CapitaLand China Trust.
Dream Team Gets Go-Ahead
ARA co-founder John Lim, along with a representative of Li Ka-shing’s CK Asset Holdings (which was among ARA’s original backers) and a nominee from Sumitomo Mitsui Banking Corporation, will join ESR Group’s board of directors upon completion of the acquisition.
ESR’s shareholders voted Wednesday to elect Lim, CK Asset executive director Justin Chiu and SMBC managing executive officer Rajeev Kannan as non-executive directors.
ESR co-founders Stuart Gibson and Jeffrey Shen will continue to serve as co-CEOs of ESR, and ARA chief executive Moses Song will stay to run the Singapore company’s day-to-day business. Logos co-founders Trent Iliffe and John Marsh will operate their own slice of the ESR industrial empire.
“We are grateful to our shareholders for their unwavering trust and support in ESR,” Gibson and Shen said Wednesday. “In joining forces with ARA (and by extension Logos), we will leverage the expertise, best practices and capital market relationships across the combined platform to grow the enlarged ESR to new heights.”
ESR in August reported that its first-half revenue grew nearly 25 percent year-on-year as assets under management shot up 36.9 percent to an all-time high of $36.3 billion. The group’s EBITDA jumped 38.6 percent to $373.5 million, with fund management EBITDA surging 50.9 percent to $97.1 million.
On Monday, ESR burnished its environmental, social and governance credentials with the announcement of the group’s first sustainability-linked loan of $700 million, with an option to upsize to $1 billion. The proceeds will be used to fund the group’s refinancing of existing borrowings, working capital requirements and for general corporate purposes.