Hong Kong-listed real estate group ESR announced that it has agreed to sell its ARA Private Funds (APF) business to entities that include an affiliate of Sumitomo Mitsui Finance and Leasing Co for an enterprise value of $270 million.
The APF business that ESR is divesting primarily consists of finite-life funds owning assets in traditional real estate sectors, including office spaces, retail outlets, and hospitality venues in Australia, Singapore, South Korea, and the US.
The management platform for Singapore Exchange-listed ARA US Hospitality Trust does not form part of this transaction, ESR said.
In total, 22 funds are being divested as part of this transaction, representing $9.8 billion in total assets under management. The assets are outside of ESR’s core New Economy focus.
ESR is streamlining its business to double down on its New Economy focus, which includes e-commerce, digital / AI, and biopharma.
“This is the first transaction as part of our stated strategy to divest up to $750 million of non-core businesses and we remain confident in our ability to deliver on that result,” said ESR Group co-founders and co-CEOs Jeffrey Shen and Stuart Gibson.
The sale of its APF business is expected to yield net proceeds of about $290 million for the group, primarily earmarked for reducing the group’s financial indebtedness.
The transaction is slated for completion by the third quarter of 2024, pending regulatory approvals and customary closing conditions.
The transaction also includes a change in leadership for the divested business. ESR said Moses Song, the current CEO of ARA, will move to lead ARAvest Pte. Ltd., the new holding entity for the ARA Private Funds, alongside new investments from MPS and Kenedix.
ARAvest aims to continue its diversified real asset investment strategy in the APAC region under the auspices of its new ownership. The existing leadership team and staff of APF will transition into new roles with ARAvest.
The divestment comes more than two years after ESR completed its $5.2 billion acquisition of real estate fund manager ARA Asset Management, including its subsidiary LOGOS.
The transaction transformed the enlarged ESR Group into APAC’s leading real asset manager and the third-largest listed real estate investment manager globally with a gross AUM of $150 billion, according to the statement.
ESR is the largest sponsor and manager of REITs in APAC with a total AUM of approximately $45 billion.
