ESR buys PE-backed real assets manager ARA for $5.2b

Warburg Pincus, China’s Avic Trust, The Straits Trading Company, Cheung Kong Property, and an entity owned by ARA co-founder John Lim took part in the 2016 deal, which saw the company delisted from the Singapore Exchange. It valued ARA at about S$1.8 billion ($1.3 billion).

Warburg Pincus was also a substantial investor in ESR, seeding the business in 2011 and helping it scale up to become the largest logistics real estate platform in the Asia Pacific region by gross floor area. The private equity firm made a partial exit through ESR’s IPO in late 2019. Its holding fell below 5% last November after several more sales, and a final exit came in the first quarter of 2021.

Warburg Pincus and other ARA shareholders will roll over their interests into ESR and have agreed to a six-month lock-up. The transaction is 10% cash, of which $269 million will come from internal reserves and the rest from a $250 million share placement to Sumitomo Mitsui Banking Corporation. The remaining stock portion comprises $4.7 billion in ESR shares with the rest in vendor notes.

Founded in 2002, ARA claims to be the largest real asset manager in Asia Pacific, with $95 billion in gross assets under management (AUM). It operates a geographically diverse platform with exposure to real estate investment trusts (REITs) and private funds focused on real estate, infrastructure and renewables, and credit.

The company has grown significantly since 2016, supported by more than $16 billion in new equity capital. Acquisitions, divestments, and development activities conducted during this period amount to nearly $20 billion in gross transaction value.

The prize asset is Logos, a logistics and data center real estate developer and fund manager with a presence in Australia, China, Singapore, Indonesia, Malaysia, Vietnam, India, Korea, and New Zealand. Over the past two years, Logos’ AUM has nearly doubled to $17 billion, while its portfolio has expanded to 8.9 million square meters of land – owned or under development – across 26 projects. On the fund management side, it has 22 institutional partners.

ESR and ARA’s combined AUM will be $129 billion, including $50 billion in new economy real estate. Over 50% of AUM will come from perpetual and core capital vehicles, including 14 listed REITs. Senior management from ARA and Logos will join ESR, according to a statement.

“Our vision has always been to build a leading fund manager focused on technology-enabled real estate, especially logistics and more recently data centers, on the back of major secular trends including the rapid rise of e-commerce, digital transformation, and the financialization of real estate in Asia Pacific,” said Jeffrey Perlman, chairman of ESR and head of Southeast Asia at Warburg Pincus.

The consolidated platform is also expected to take advantage of two trends in real estate: a rebalancing of portfolios by global investors, which is seeing increased allocations to new economy assets; and a concentration of manager relationships.

“Post-transaction, the enlarged ESR Group will witness immediate growth in size, scale, and offerings – as global investors seek to give more capital to increasingly fewer managers, we are uniquely positioned to capture an outsized share of that capital,” said Jeffrey Shen and Stuart Gibson, co-founders and co-CEOs of ESR.

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• Topics
• Trade sale
• Real estate
• Infrastructure
• Asia
• Logistics
• data center
• Warburg Pincus Asia