ESR to buy Singapore-based ARA for $7b, creating Asia’s biggest real estate fund manager

Following the deal, the combined entity will have US$129 billion (S$174.2 billion) of assets under management.
Following the deal, the combined entity will have US$129 billion (S$174.2 billion) of assets under management.PHOTO: AFP

SINGAPORE - Hong Kong’s ESR Cayman will buy the entire share capital of Singapore-based ARA Asset Management (ARA) for US$5.2 billion ($7 billion), the companies said on Thursday (Aug 5).

This will create Asia Pacific’s biggest real asset fund manager and the world’s third-largest listed real estate asset manager. 

If the deal goes through, the combined entity will have US$129 billion of assets under management, of which US$50 billion will focus on new economy real estate, which are technology-focused assets such as data centres. This would also make it the largest new economy real estate fund in the region. 

As part of the acquisition agreement, ESR Cayman will acquire all of ARA’s share capital with US$4.7 billion in new ESR shares and vendor loan notes as well as US$519 million in cash, part of which will be funded by a share placement of US$250 million to Sumitomo Mitsui Banking Corporation (SMBC). 

Meanwhile, Singapore-listed Straits Trading announced separately that it will receive US$845.3 million from ESR Cayman for its 18.97 per cent stake in ARA. This will comprise a combination of cash, shares of Hong Kong-listed ESR Cayman and vendor loan notes upon completion of the acquisition.

ESR Cayman owns 67 per cent of the manager of Singapore-listed ESR Reit. It also indirectly owns 100 per cent of the manager of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust. 

If the deal goes through, in addition to these two managers, ESR Cayman will also indirectly own the manager of Singapore-listed ARA Logos Logistics Trust. 

ESR Cayman said that its founders, together with Omers and JD.com, who represent all shareholders that have representatives on the board, have provided irrevocable undertakings that they will vote in favour of the transaction.

ARA owns a controlling stake in Logos, a fully integrated logistics and data centre real estate developer and fund manager. Logos has US$17 billion in assets under management, which includes ARA Logos Logistics Trust. 

ARA is also the sponsor of Singapore-listed ARA US Hospitality Trust and Suntec Reit.

ESR Cayman chairman Jeffrey Perlman said in a press statement that the acquisition of ARA will enable ESR Cayman to build a stronger new economy-focused portfolio comprising logistics and data centres to support a rise in e-commerce in the Asia Pacific.

“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”, he said.

ARA was founded in 2002 and listed on the Singapore stock exchange in 2007. In 2017, ARA group founder and chief executive officer John Lim led a consortium that included Straits Trading to take the group private.

In a statement, Mr Lim said that together with ESR Cayman, ARA will provide investors with “an outsized contribution from new economy real estate” after two decades of establishing itself as a real asset manager with a “successful track record across geographies, asset classes and strategies”.

Mr Lim, together with a representative from each of CK Asset Holdings and SMBC, will be appointed to ESR Cayman’s board of directors as part of the acquisition.

Meanwhile, the senior management of ARA and Logos will also join the enlarged ESR Group to drive its next phase of growth.

Units of ARA Logos Logistics Trust closed on Thursday at 88.5 cents, down 0.6 per cent, while ESR-Reit units closed at 44 cents, down 2.2 per cent. Sabana Reit closed at 44.5 cents, up 1.1 per cent. Suntec Reit was unchanged at $1.44, while ARA US Hospitality Trust fell 3.7 per cent to 51.5 US cents. 

Shares of Straits Trading jumped 13.8 per cent to end at $3.22.