ESR Cayman completed of its acquisition of ARA Asset Management, including its subsidiary LOGOS on Jan 20. The US$5.2 billion transaction is likely to transform the ESR group into Asia Pacific's top real asset manager powered by the New Economy and the third-largest listed real estate investment manager globally with a gross AUM of US$140 billion.
“We are excited to bring together the best-in-class platforms of ESR, ARA and LOGOS to form APAC’s largest real asset manager powered by the New Economy," says chairman Jeffrey Perlman.
"On the back of the accelerating advancement, broad-based adoption and high-frequency usage of technology, we are witnessing a once-in-a-multi generation change in real estate and our vision is to deliver a fully integrated solution to leading global capital partners and customers.
"As a part of this continuous pursuit, the ESR Group will leverage its expanded scale and offerings, capabilities and resources to provide a full suite of New Economy real estate development products and real asset investment solutions that spur meaningful, long-term sustainable value for all its stakeholders," he adds.
The transaction was settled via a combination of cash and stock. For the stock component, US$4.7 billion was paid by the issue of shares at HK$27 per share, which represents approximately 31.8% of the total issued shares immediately upon completion.
The cash portion, amounting to US$519 million, was partially funded by a US$250 million share placement to SMBC which further reinforces SMBC’s strategic commitment to the ESR.
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The founders and senior management of ESR will continue to remain as the largest shareholder bloc with 23% held between them.
Warburg Pincus, which previously co-founded ESR alongside Jeffrey Shen, Stuart Gibson and other key entrepreneurs, will become the largest institutional shareholder in the company with a 13.2% stake.
APAC opportunity
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According to JLL, ESR’s total addressable market (TAM) is now set to potentially triple from US$750 billion to US$2.5 trillion across the region’s most growth sectors of logistics, data centres and public REITS.
The logistics sector, supported by the continued rise of e-commerce and supply chain localisation (including higher levels of local inventory), is projected to grow by up to 3.4 times by 2030 to reach US$1 trillion while data centres will increase by up to 3.9 times to US$150 billion.
As witnessed in the US over the past 20 years, where total REIT market capitalisation rose from approximately US$100 billion (1% of GDP) to nearly US$1.2 trillion today (6% of GDP), the public REIT sector is also set to take off in APAC.
Over the remainder of the decade, JLL is projecting growth of up to 3.2 times from a total market capitalisation of US$407 billion today (1% of GDP) to US$1.3 trillion (2% of GDP).
Institutional investment in income-producing real estate is expected to increase from US$3.3 trillion in 2020 to US$5.2 trillion in 2025 in gross asset value, representing a US$2 trillion growth opportunity.
“Global investors are increasingly consolidating their relationships towards a smaller number of large-scale managers with diversified capabilities and strong track records," Shen and Gibson say in a statement.
Against this backdrop, ESR is in a prime position to capitalise on this outsized growth, leveraging the expanded scale and offerings of the enlarged platform as APAC’s leading real asset manager to deliver unique ‘one-of-a-kind’ integrated solutions,” they add.
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LOGOS to retain brand for three years
LOGOS will retain its existing independent brand and operations for the next three years. The enlarged ESR Group will have APAC’s largest so-called "New Economy" real estate platform with an AUM of US$59 billion, development work-in-progress of over US$10 billion and a development pipeline of over 9 million sq m across 10 countries which represents over 95% of GDP in APAC. ESR is also likely to have a leading position in every key market in APAC.
ESR is the largest sponsor and manager of REITs in APAC with over a 10% market share. “This positions the group well to capitalise on the financialisation of real estate in APAC where, driven by the support of new REIT legislation and growing demand for professional and institutional ownership and management of real estate, REITs are emerging in various key markets including China, South Korea and India,” ESR says.
“The group is committed to the long-term growth of all ESR-managed REITs and its sponsorship will include access to its strong portfolio of real estate properties as well as financial and operational support. The group’s continued commitment and support will ensure the REITs are well-positioned to capture the largest secular trends and deliver long-term sustainable growth and expansion,” ESR says in a press release.
Photo credit: ESR
