ESR is selling ARA Private Funds (APF), its Australian, Singaporean, and South Korean business focused on traditional property sectors like offices, retail, and hotels to buyers including an affiliate of Sumitomo Mitsui Finance and Leasing (SMFL) for $270m (€246.8m).
The real assets manager said the sale of the non-core businesses is in line with its strategy to simplify its business and focus on “new economy” real estate properties of logistics facilities, data centres, and life sciences.
The expected net proceeds will mainly be used to reduce the group’s debt.
ESR, which acquired ARA Asset Management in 2021 for $5.2bn, said following a review of the businesses acquired as part of the transaction, it identified up to $750m of non-core businesses to be divested, and the APF transaction represents the first of those divestments.
In total, 22 funds are being divested as part of this transaction, representing $9.8bn in assets under management, “with close to 100% of the assets in these funds sitting outside of ESR’s core new economy focus”, it said.
ESR said Logos, the listed real estate investment trust management business, the infrastructure/renewables platform and the European platform, from the ARA acquisition, do not form part of this transaction. The remaining ARA-branded vehicles within the group will be rebranded to ESR, it added.
APF’s buyers include SMFL MIRAI Partners Singapore (MPS) and Kenedix.
Moses Song, the current CEO of ARA, will leave ESR to assume the role of CEO of ARAvest, the new holding company of APF, and will invest alongside MPS and Kenedix in the business. The existing leadership team and staff of APF will transition into new roles with ARAvest.
Jeffrey Shen and Stuart Gibson, ESR group co-founders and co-CEOs, said: “The transaction represents a key milestone in ESR’s stated strategy to streamline its business and double down on its new economy focus, which continues to be underpinned by high-growth industries like e-commerce, digital/AI and biopharma.
”These sectors are on the cutting edge of digitalisation, science and technology and they will continue to drive the demand for and investment in quality logistics, high-tech industrial, data centres and life sciences properties.”
The co-founders added that the divestment ”will enable us to utilise other capital within the group to invest into core areas of growth and deliver long-term shareholder value”.
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