ESR expands in Australia through Centuria stake purchase

Pan-Asian logistics group ESR has acquired a 14.9% stake in Australia’s Centuria Capital Group, its second Australian investment in as many weeks.

Last week, ESR bought an 18.06% stake in Propertylink.

Centuria in turn has a 17% holding in Propertylink and had a AUD573m (€379m) cash-and-scrip takeover offer rejected last month. Now, Centuria itself is the takeover target.

ESR, which is backed by Warburg Pincus, bought its Centuria stake after the market closed on Monday for AUD50.8m – paying a premium for the shares.

Market sources say ESR paid AUD1.48 for each Centuria share, against yesterday’s last traded price of AUD1.30.

Centuria informed the Australia Securities Exchange today of the acquisition by ESR. In a statement, it noted that “the acquisition of 5% of that stake is subject to approval by the Federal Treasurer under the Foreign Acquisitions and Takeovers Act”.

Centuria said: “As with all key stakeholders, CNI (Centuria) looks forward to meeting ESR at an appropriate time.”

Compared to Propertylink, which has total funds under management of less than AUD2bn across its listed vehicles and partnerships, Centuria is a much bigger group. It manages AUD5.3bn in assets: AUD3.8bn in its listed vehicles and AUD1.5bn in 17 unlisted funds, including its first residential land development fund.

A source familiar with ESR’s expansion strategy told IPE Real Assets that ESR was looking for geographical diversification. The company is currently focused on north Asia.

It has also been looking to deepen is presence in south-east Asia through takeovers of real estate companies listed in Singapore. It was one of the parties seeking to take over Global Logistic Properties (GLP).

Commenting on the acquisitions, Michael Vincent, an A-REIT analyst with CLSA, said in a client note today that ESR clearly had big aspirations for Australia.

“I think PLG (Propertylink) will be their first takeover target, leveraging their stake in CNI to get control of PLG,” he said.

The analyst suggested that the only saviour for Propertylink would be if one of its partners turned into a ‘white knight’ to keep the platform independent.

Vincent was referring to Propertylink’s capital partners, which include a diverse set of large institutional and sovereign investors, including Al Salam Bank (Bahrain), FOSUN, Goldman Sachs, M&G Investments, The Norinchukin Bank and SEDCO Capital (Saudi Arabia).

“A number of them would not want ESR taking control,” Vincent said.