ARA Asset Management has become the largest shareholder in Cromwell Property Group after acquiring the major part of a stake previously held by South Africa’s Redefine Properties.
According to analysts, ARA is paying a 3% premium to the stock’s last closing price, takes the cost of acquiring the 19.5% stake to AUD405m (€256m).
Redefine, which first invested in Cromwell in 2009, will now hold a 3.09% stake.
John Lim, ARA’s Group CEO, said Cromwell was an attractive acquisition target, with strong platforms, investment track record and corporate governance.
“Australia continues to offer strong investment and capital-raising opportunities to support the growth of our funds’ platforms,” he said.
David Blight, CEO of ARA Australia, told IPE Real Assets: “Our plan is to help Cromwell grow and expand its business.”
Asked if ARA intends to use the Cromwell platform to grow ARA’s own investment in Australia, Blight said the group had built up a sizeable platform in Australia. ARA and Cromwell operated in different market segments in Australia, he said.
“Our Australian platform is focused on core and value-add assets at the bigger end of the market,” Blight said.
“From what we can see, there is very little overlap. So we don’t anticipate any situation where we would bump into each other in the market.
“We have an AUD2.7bn footprint in Australia now. And we still have capital that we are looking to place into Australia. But as the pricing [of assets] gets bigger, it is getting harder.”
ARA last week announced plans to expand into Europe – a region that Cromwell has been targeting to grow its fund management business. This follows the listing of the Cromwell European REIT in Singapore last year.
Blight said: “Obviously, there could well be some synergy between Cromwell and ARA in Europe.
“Our activities in Europe have just started. We don’t have assets there yet. We do have a reasonable network, we could – and we will – offer to help with [Cromwell’s] plans to grow their European business.”
“We hope to get on the board,” said Blight. “Obviously, it is up to the board as to when a board seat would be offered, if at all.”
Cromwell’s CEO, Paul Weightman, told IPE Real Assets: “Over the years we have had many watersheds in our journey. This represents the next logical step: being able to have access to big capital sources with a partner who likes our model and management style and sees the opportunity for us to deploy capital for them.
“It is a critical moment in our history. I think we will look back on it as having provided a leg-up in terms of capacity to grow our business.”
Weightman said he had known ARA for a long time and opened discussions with them on investing in the group early last year.
But, he said, the new partners had yet to discuss potential synergies in Australia and Europe.
“Cromwell’s European platform has the capacity to deploy more than 50% more capital due to an extensive network of 200 real estate professionals in 20 offices across 12 countries,” Weightman said.
“Redefine was a great partner who supported us in a number of initiatives, but the reality of the South African economy is that it is an appropriate time for them to repatriate some capital.”
The departure of the South African investor has been a subject of market speculation for some time.
The deal is subject to approval by Australia’s Foreign Investment Review Board.