ESR Group announced on March 11 that it is divesting its ARA Private Funds (APF) business in Australia, Singapore, South Korea and the USA (excluding ARA US Hospitality Trust XZL ) to entities which include an affiliate of Sumitomo Mitsui Finance and Leasing Co for an agreed enterprise value of US$270 million.
Post net asset adjustments, repayment of intra-group indebtedness, transaction costs and tax, the expected net proceeds to ESR are approximately US$290 million, which will be predominantly used to reduce the Group’s financial indebtedness. The purchase price represents a gain on sale of approximately US$50 million
The APF business to be sold primarily consists of finite-life funds owning assets in traditional real estate sectors including office, retail and hospitality. In total, 22 funds are being divested as part of this transaction, representing US$9.8 billion in AUM, with close to 100% of the assets in these funds sitting outside of ESR’s core New Economy focus.
The transaction is structured as the sale of ESR’s interests in certain subsidiaries, with the purchase price calculated with reference to their net asset value and a market valuation for the funds management platform. The transaction is subject to regulatory and other conditions and is expected to be completed by 3Q 2024.
Following a detailed review of the businesses acquired as part of the ARA Asset Management transaction, the Board identified up to US$750 million of non-core businesses to be divested, and this transaction represents the first of those divestments.
LOGOS, the listed REIT management business, the Infrastructure / Renewables platform and the European platform, from the ARA Asset Management acquisition, do not form part of this transaction. As part of the transaction, the remaining ARA branded vehicles within the Group will be rebranded to ESR.
