The managers of Singapore-based logistics real estate investors ESR-REIT and ARA LOGOS Logistics Trust are looking at a merger that would bring S$5.4 billion ($4 billion) of assets under the new entity’s management.
The proposed deal, in which ESR-REIT will acquire units of ARA LOGOS Logistics Trust, is valued at S$1.4 billion ($1 billion) in shares and cash.
Post the acquisition, the merged entity, which will be called ESR-LOGOS REIT, will manage S$5.4 billion of assets, and become one of the 10 largest Singapore REITs by free-float market capitalisation, according to a press statement.
The REIT will encompass 87 portfolio properties, including 20 in Australia, and 41 fund properties in Australia held through fund investments.
“The proposed merger will also deepen our presence in key Singapore industrial clusters and expand our foothold in new economic hubs in Australia,” said ESR-REIT’s chief executive and executive director Adrian Chui.
ESR will pay ALOG’s shareholders 10% of the deal in cash of S$0.095 per ALOG unit, and the rest in new issuance of 1.6765 new ESR-REIT units per each ALOG unit at S$0.51.
The larger market capitalisation and free float will increase its weightage in the FTSE EPRA Nareit Global Developed Index and could attract more institutional investors, said ALOG’s chief executive Karen Lee.
The merger is expected to be finalised in the first quarter of next year. The transaction is subject to unitholder and regulatory approvals, and is conditional on the completion of the acquisition of ARA Asset Management by ESR Cayman, announced in August.
ESR Cayman had proposed to acquire 100% of ARA, which via LOGOS owns 100% of the ALOG manager, for $5.2 billion. The move will create the third-largest listed real estate manager globally after Brookfield and Blackstone with combined assets under management (AUM) of $131 billion.
Listed on the Singapore stock exchange, ESR-REIT has a portfolio of 58 properties in Singapore worth S$3.2 billion. It also has a 10% stake in ESR Australia Logistics Partnership, a private fund comprising 36 predominantly freehold logistics properties in Australia.
ALOG, also listed in Singapore, has 29 logistics warehouse properties in Singapore and Australia valued at around S$1.8 billion.
Over the next 18 to 24 months, the two REITS are expected to divest assets that are considered to be non-core, and instead focus on properties that have exposure to the “new economy”, such as logistics, and high-specifications industrial property.
Citigroup and Maybank Kim Eng Securities were ESR-REIT’s financial advisors for the deal. Bank of America Securities and DBS acted as financial advisors for ALOG.