ESR have announced plans to merge the ESR-REIT with the ARA LOGOS Logistics Trust to form a S$5.4bn Trust and expanding ESR to a $131bn New Economy power house.
The proposed merger comes on the heels of ESR’s announcement to acquire 100% of ARA Asset Management which included LOGOS, the owner of the ARA LOGOS Logistics Trust manager.
The ESR-ARA transaction is set to create the largest real asset manager in APAC and the third largest listed real estate investment manager globally with a combined AUM of US$131 billion.
The enlarged ESR Group is powered by the leading New Economy real estate platform with over US$50 billion of AUM and which represents approximately 80% of the enlarged Group’s EBITDA.
Additionally, over 50% of the enlarged Group’s AUM will come from perpetual and core capital vehicles including 14 listed REITs, which strengthens the Group’s fully integrated closed loop solutions ecosystem for capital partners and further enhances the platform’s earnings resilience and asset light trajectory.
As the largest sponsor of REITs in APAC, ESR Group is highly committed to the long-term growth of ESR-LOGOS REIT. It will be an integral part of ESR’s enlarged platform, leveraging ESR Group’s market leading AUM, development work-in-progress of over US$10 billion and pipeline of over 7.7 million square metres across 10 countries that represents over 95% of GDP in APAC.
Post-Merger, the total assets of the enlarged REIT will grow to approximately S$5.4 billion (approximately US$4 billion), making it one of the top 10 largest S-REITs by free float market capitalisation.
Jeffrey Perlman, Chairman of ESR, said: “This Merger brings together two best-in-class S-REITs to create an even stronger platform for sustainable growth and value creation for unitholders. With the acquisition of ARA (and its captive logistics subsidiary, LOGOS), we believe we can further transform the Enlarged REIT into the pre-eminent New Economy S-REIT in APAC. This is just one of the several value enhancing steps for the broader Group that we intend to take as a part of the ARA Acquisition.
We are witnessing a once-in-a-generation change in real estate driven by the rapid rise of e-commerce, digital transformation and the financialisation of real estate. As the largest real asset manager and the largest sponsor of REITs in APAC following the planned acquisition of ARA, the Enlarged ESR Group is uniquely positioned to capture these mega trends and high conviction secular growth opportunities.”
The planned acquisition of ARA brings together two of the region’s fastest growing platforms, ESR and LOGOS, to form the leading New Economy real estate platform in APAC, doubling down on this rapidly expanding segment with two leading growth engines. The enlarged Group’s New Economy AUM, WIP and development pipeline will be the largest in APAC with top 1 or 2 positions in every market across the region.
Jeffrey Shen and Stuart Gibson, ESR Co-founders and Co-CEOs, added: “We are very excited about the Proposed Merger of ESR-REIT and ALOG. By joining forces, we are confident that the enhanced size and scale of the Enlarged REIT will create a highly attractive platform for customers and investors and also bring about new strengths and opportunities. With over US$50 billion4 of logistics, industrial and data centre AUM and a development WIP of over US$10 billion5 post the planned acquisition of ARA, we remain deeply committed to supporting the long-term growth of the Enlarged REIT by leveraging ESR’s position as the leading New Economy real estate platform in APAC.”
The enlarged REIT will hold 87 Portfolio Properties (including 20 in Australia) and 41 Fund Properties in Australia held through fund investments, totalling a net leasable area of 24.1 million square feet (2.2 million square metres). This diversified portfolio encompasses logistics/warehouse, high- specifications industrial properties, business parks and general industrial properties.
Adrian Chui, Chief Executive Officer and Executive Director of the ESR-REIT Manager, said: “The Proposed Merger is in line with ESR-REIT’s strategy to accelerate our exposure to the sustainable growth of in-demand logistics properties – the largest secular growth opportunity in Asia, driven by the rapid rise of e-commerce and further amplified by paradigm shifts in global manufacturing supply chains. The Proposed Merger will also deepen our presence in key Singapore industrial clusters and expand our foothold in new economic hubs in Australia. With the combination of two best-in-class platforms with solid track records in value creation, more competitive and wider pools of capital as well as lower portfolio risks, the Proposed Merger will re-position and propel the ESR-LOGOS REIT towards an enhanced growth trajectory, backed by our Sponsor, ESR Group. ESR-LOGOS REIT will have access to the Sponsor’s New Economy pipeline to supercharge growth to become a leading Future- Ready APAC S-REIT. We are excited about the prospects for our future and the value we can deliver for our combined group of unitholders.”
Karen Lee, Chief Executive Officer of the ALOG Manager, said: “The Proposed Merger will be a win- win transaction for unitholders of both REITs. It is the next chapter in our transformational growth, delivering value accretion for our unitholders while positioning us for sustainable growth. The Proposed Merger will more than double ALOG’s size and propel ESR-LOGOS REIT to become one of the top 10 largest S-REITs by free float market capitalisation. The benefits of an enlarged asset base under the merged ESR-LOGOS REIT are numerous and immediate. It enhances our financial capacity and flexibility to pursue larger and more sizeable growth opportunities. In addition, it allows us to conduct active portfolio rebalancing and capital recycling to pursue our supercharged growth trajectory. ESR-LOGOS REIT’s larger market capitalisation and free float is expected to lead to higher trading liquidity, increase its weightage in the FTSE EPRA Nareit Global Developed Index and thereby attract a larger base of institutional investors. Together, we are confident that we will be in an even stronger position to grow the combined platform and continue delivering long-term sustainable value to our combined group of unitholders.”
The Proposed Merger will be effected by way of a trust scheme of arrangement in compliance with the Singapore Code on Take-overs and Mergers whereby ALOG Unitholders will receive a Scheme Consideration of S$0.95 for each ALOG Unit comprising:
- the payment of S$0.095 in cash per ALOG Unit (“Cash Consideration”); and
- the allotment and issue of 1.6765 new ESR-REIT Units (“Consideration Units”) for each ALOG Unit, issued at S$0.51.
The aggregate Scheme Consideration is based on a gross exchange ratio of 1.863x.
The total consideration for the Proposed Merger is approximately S$1.4 billion (approximately US$1 billion) as at the Announcement Date.
Upon completion of the Proposed Merger, ESR is expected to hold approximately 10.9% of the total issued units in the Enlarged REIT.
The Merger is subject to the approval of ESR-REIT and ALOG Unitholders. Completion is expected by the first quarter of 2022.
Further information on the Proposed Merger can be found in the joint announcement, as well as both ESR-REIT’s and ALOG’s investor presentations, which can be downloaded from SGXNET or from ESR- REIT’s and ALOG’s respective websites.
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