Warburg Pincus-backed ESR has made a $505 million all-cash offer for Sydney-based real estate investment manager Propertylink, according to an announcement to the Australian stock exchange late last week.
The Pan-Asian warehouse investment platform’s Australian arm, is offering A$1.15 per security to take over all securities that it does not already own in the listed real estate investment manager. The proposal represents a 9.5 percent premium to Propertylink’s last closing price, according to a company statement.
The offer by ESR, a Hong Kong-based logistics developer and fund manager, comes just over two months after the nine-year-old industrial real estate firm bought into the Australian market by acquiring a development unit of real estate investment firm Charter Hall.
ESR Dives into Aussie Buyout Battle
ESR’s indicative offer is, however, conditional upon a peaceful settlement to a year-long battle between Propertylink and a competing Australian REIT where ESR also holds a stake.
Propertylink had launched an A$755 million offer for all outstanding shares of Centuria Industrial REIT, known by its ticker as CIP, after an overnight raid to grab a more than 12 percent stake earlier this month.
ESR said that the Centuria Industrial proposal is not in the best interests of Propertylink security-holders. In a letter to Propertylink’s CEO Stuart Dawes, ESR estimated that the Propertylink offer for Centuria Industrial would be about nine percent dilutive to the net tangible assets per security for current Propertylink securityholders and that if the Centuria Industrial offer was successful, “Propertylink’s gearing could increase from 29.6 percent to 46 percent” on a pro forma basis.
Propertylink has urged its securityholders to “take no action.” It said that there was no guarantee that the proposal or any discussions with ESR would lead to a formal binding offer.
Further complicating the power struggle, ESR took a 14.9 percent stake in Centuria and an 18.06 percent stake in Propertylink over a two-week period last year, and is the single largest shareholder in both companies.
Ecommerce Boosts Competition for Australian Warehouses
Centuria, which controls an A$1 billion property portfolio of industrial and logistics centres as well as owning 9.3 percent of Propertylink, weighed into the battle for its industrial trust, calling for a board shakeup at Propertylink, excluding chief executive Stuart Dawes.
The property fund had its own ambition to take over Propertylink a year ago. Propertylink rebuffed that effort in September last year, but in a surprise turnaround this month turned its attention to Centuria’s listed industrial fund, launching a A$755 million cash and scrip bid. The move for a board spill by Centuria was couched in terms of a defense of Centuria’s stakeholding in Propertylink.
Underpinning the three-way tussle was the chance to get access to high-quality industrial assets owned by Propertylink and Centuria Industrial, according to The Sydney Morning Herald. The newspaper reported that, backed by the rise of the e-commerce sector, demand for warehouses for storage and distribution is very strong. Land values and rents for logistics asset are near all-time highs, particularly along Australia’s eastern seaboard.
ESR Aims for Second Aussie Acquisition in Three Months
ESR marked the launch of its Australian business in July with a $76 million buyout of Australian real estate heavyweight Charter Hall’s Commercial & Industrial Property Pty Ltd, along with its management team.
The acquisition gave ESR the substantial Australian presence that it has been looking for since at least early 2016 when it entered ultimately unsuccessful discussions with the Aussie industrial developer Goodman Group for the purchase of a set of three Australian logistics portfolios worth some A$1 billion.
Phil Pearce, who became CEO of ESR Australia as part of the investment, earlier pointed to the growth of ecommerce, which is still in its early stages in Australia, as presenting a potential driver for ESR’s expansion in the country. “Amazon just entered the market at Christmas time. JD.com is our shareholder, while Alibaba, and Amazon are among tenants in the region,” he said.
ESR was formed in Singapore in January 2016 through the merger of two of the region’s fastest-growing warehouse developers, Shanghai-based e-Shang and Singapore’s Redwood Group.
Backed by some of the world’s leading pension funds and investment managers, including APG, CPPIB, Goldman Sachs, PGGM, Ping An and SK Holdings, ESR has over 10 million square of projects owned and under development across China, Japan, Singapore, South Korea and India. The company also runs capital and fund management offices in Hong Kong and Singapore.