Welcome to this week’s Property News.
The ESR takeover of ARA is a big deal for the Asia Pacific Region, establishing the largest fund management group in the region with $129bn of funds under management (FUM). This compares to Goodman who manage $53bn globally and according to ESR it puts the new group into the top 10 Investment Managers in the world. By comparison Brookfield manages $600bn of FUM and Blackstone manage $684bn.
ESR was formed in 2016 by the merger of the Japan-centric Redwood Group and Warburg Pincus’ China-focused entity e-Shang (ie E–Shang Redwood). ESR was listed in 2019 and Warburg Pincus sold down its interest in the process. Warburg Pincus sold the balance of its shares earlier this year. ARA had considered a dual listing on the Hong Kong Exchange earlier this year. The move now to merge the entities in my mind is designed to move ARA from its Singapore exchange to Hong Kong exchange to ensure its expansion into China can be achieved at a greater pace. ESR believe the unitisation of real estate in China, Korea and India will bring significant opportunities to the group.
ESR will continue to focus on New Economy assets which they define as Logistics assets and Data Centres and we can expect ESR to continue to pursue these in Australia.
In other news this week, full year results are now starting to flow from the Australian listed REITs with Centuria Industrial, Centuria Office and BWP Trust each issuing reports. We have covered these results this week and will continue to report on other REITS as they occur this week. With a focus on Metropolitan office assets, Centuira’s Office Fund was able to increase occupancy to 93% and maintain distributions in line with guidance, equating to a 6.7% yield. Likewise the Industrial Fund maintain occupancy at 96.9%, and whilst meeting its distribution forecast, the stock and NTA has moved 36% higher pushing down the distribution yield to 4.4%, but delivering a total return on equity above 40%. The BWP Trust maintained its distribution, dipping into capital profits to offset lower income yields.
The Property Council issued the latest Office Market Reports which surprisingly showed most CBD markets (other than Sydney and Melbourne) with marginal reduction in vacancy rates. The aggregate vacancy rate for all office markets increased only slightly from 11.6% to 11.9%, however with net absorption in negative territory now for almost 2 years (on a national basis), the many proposed Office development projects are likely to be be waiting longer for the right conditions to proceed with confidence.
I expect that conditions will improve quickly as soon we get out of lock down and can re-open border and business.
If you have any news, information or research reports you’d like us to share with the market, please feel free to send me an email at info@propertymarkets.news.
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