ESR-Reit proposes merger with ARA Logos

ESR-Reit proposes merger with ARA Logos
2 Jalan Kilang Barat, Singapore Image: Courtesy of ESR Reit

ESR Cayman Limited Friday announced ESR-Reit’s proposed merger with ARA Logos Logistics Trust.

According to a press release by ESR, ARA Logos Logistics Trust(ALOG) will become a wholly-owned sub-trust of ESR-Reit to form a New Economy APAC S-Reit named ESR-Logos Reit (Enlarged Reit).

ESR said the total consideration for the proposed merger is approximately S$1.4 billion (approximately US$1 billion) as at the announcement date.

The proposed merger comes on the heels of ESR’s announcement to acquire 100% of the share capital of ARA Asset Management which via Logos owns 100% of the ALOG manager. 

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.”

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 billion of logistics, industrial and data centre AUM and a development work-in-progress of over US$10 billion 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.

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.

ESR said the aggregate scheme consideration is based on a gross exchange ratio of 1.863x.

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.