NDP Special Offer! On 3 November 2021, the shareholders of ESR Cayman gave the green light for the US$5.2 billion acquisition of the ARA Asset Management. ESR Cayman is listed in Hong Kong Stock Exchange and is the sponsor of SGX-listed ESR-REIT. On the other hand, LOGOS is the sponsor of ARA Logos Logistics Trust and is majority-owned by ARA Asset Management. The acquisition of ARA Asset Management by ESR Cayman effectively paves the way for the ESR-REIT merger with ARA Logos Logistics Trust.
Although the writing is on the wall that the ESR-REIT merger is going to take place sooner or later, it is not a done deal yet. ESR-REIT unitholders are to cast the vote on 27 January 2022. For the resolution to be passed, more than 50% of the total number of votes is required. ARA Logos Logistics Trust unitholders will meet on the same day to vote but more than 75% of the votes is required for the resolution to be passed.
A Lifetime Member has requested for my insight on the ESR-REIT merger. As such, I will share my insights on this interesting development within the industrial S-REIT sector. Although I have no skin in the game, I am vested in Mapletree Logistics Trust which is a close competitor of ESR-REIT and ARA Logos Logistics Trust.
Big fish eat small fish and small fish eat shrimps. This is the fundamental fact of life. Amidst the fallout from the protracted pandemic crisis, the S-REIT sector is undergoing a sweeping consolidation. Before I touch on my thoughts on the ESR-REIT merger, it may be useful to lay out some background information on the two S-REITs. Interestingly, the two candidates in this story were the result of a series of mergers and acquisitions prior to this ESR-REIT merger.
Local investors may not have heard of ESR-REIT prior to 2017. This is because the sponsor (ESR Cayman) formed the S-REIT through a “back-door” approach. In January 2017, ESR Cayman acquired an 80% stake in the former Cambridge Industrial Trust, which was sold by National Australia Bank and Oxley Global. Following the acquisition, ESR rebranded Cambridge Industrial Trust to ESR REIT. ESR Cayman was formed in 2016 through the merger of Japan’s Redwood Group and Chinese e-Shang, co-founded by private equity firm Warburg Pincus in 2011. For this reason, ESR stands for e-Shang Redwood. ESR Cayman was listed in Hong Kong stock market in 2019 and GIC owns 5.96% stake as of 13 August 2021.
On the other hand, ARA Logos Logistics Trust is previously known as Cache Logistics Trust, which was acquired by ARA Asset Management. Subsequently, ARA rebranded Cache Logistics Trust to ARA Logos Logistics Trust. For unitholder of ARA Logos Logistics Trust, it must have been a turbulent ride for the past few years. The original sponsor was CWT but they sold their stakes in the S-REIT to debt-laden HNA group who then sold to ARA. And now, ARA is being acquired, thereby leaving the door open for the ESR-REIT merger.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am not vested in ESR-REIT nor ARA Logos Logistics Trust. In this article, I shall touch on the ESR-REIT merger from the perspective of both S-REITs’ unitholders.
ESR-REIT merger: From ESR-REIT unitholders’ perspective
Usually, I am cautious of S-REIT with foreign sponsors, especially those that I have never heard of. This is because it may be difficult for Singapore retail investors to assess the strength of the foreign sponsors and the financial health of the real estate assets in foreign countries. The collapse of Eagle Hospitality Trust validated the importance of choosing an S-REIT with a strong sponsor. However, ESR-REIT could be an interesting investment because most of the underlying industrial properties are located in Singapore. Currently, ESR-REIT holds interest in a diversified portfolio of 55 properties located across Singapore, with a total gross floor area of approximately 15.2 million square feet and an aggregate property value of $3.2 billion.
For perspective, this will be the fourth attempt by ESR Cayman to acquire an industrial S-REIT. After acquiring Cambridge Industrial Trust in 2017 and Viva Industrial Trust in 2018, ESR-REIT tried to merge with Sabana REIT unsuccessfully. Unexpectedly, activist fund Quarz Capital had torpedoed the deal. The latest ESR-REIT merger with ARA Logos Logistics Trust could [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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