ESR to buy ARA for $5.2 billion to create No.3 listed property asset manager

(Reuters) -Hong Kong-headquartered ESR Cayman Ltd will acquire real estate fund manager ARA Asset Management Ltd for $5.2 billion, the companies said, creating the third-largest listed real estate investment manager in the world.

The combined entity will have $129 billion in assets under management, of which over $50 billion is new economy real estate such as data centres, ESR said in a statement on Wednesday.

ESR will acquire 100% of the share capital of ARA, Asia’s biggest real asset fund manager, which has a fast-growing new economy real estate platform via its unit LOGOS.

Ninety percent of the purchase will be paid via stock and the rest with cash, ESR said.

The deal will help ESR better capitalize on the rapid rise of e-commerce and digital businesses, the company said, adding that its new economy assets will jump 49% with the acquisition.

ESR will also have “dry powder” of $7 billion to invest in new logistics and data centre projects.

Global investors are redeploying capital into new economy real estate, where they have been “meaningfully” underweight, ESR Chairman Jeffrey Perlman said in a statement.

“As we usher in this new era of real estate, the enlarged ESR Group is even better positioned to capture this outsized market opportunity,” Perlman said.

The purchase is also aimed at capitalising on a trend that has global investors increasingly allocating more capital to a small roster of large-scale professional managers, ESR said.

Citigroup was the lead financial adviser for ARA. Morgan Stanley was the financial adviser for ESR.

ESR was co-founded by its executives and private equity firm Warburg Pincus in Shanghai a decade ago and has built its scale over the years by a number of acquisitions. Warburg Pincus exited its investment in the firm earlier this year.

In April, ESR clinched another deal, in partnership with Singapore’s GIC, to buy some Australian assets from Blackstone Group Inc for $2.8 billion.

ARA co-founder John Lim teamed up with Warburg and other investors to delist the company from the Singapore bourse and take it private in 2017. Shareholders include Hong Kong billionaire Li Ka-shing’s CK Asset Holdings and Singapore’s Straits Trading Company.

ESR’s purchase of ARA is subject to shareholder and regulatory approval. It is expected to close by year-end or in the first quarter of 2022.

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