The $US7bn ($10.9bn) privatisation bid for ESR is expected to be a catalyst for change at Cromwell Property, with the target likely to accelerate plans to sell its 30 per cent interest in the Australian listed real estate company.
Hong Kong’s ESR, which has about $US154bn of assets under management, has received a $US7bn offer from a consortium of investment firms, including Starwood Capital and Warburg Pincus.
Cromwell is more than 30 per cent-owned by ARA Asset Management, which was purchased by ESR, and ESR has said the interest is non-core.
Some think the latest play may accelerate a sale.
Morgan Stanley Asia and Deutsche Bank are acting as co-lead financial advisers to the bidding consortium, while Goldman Sachs and UBS are joint financial advisers.
DataRoom reported in May that ESR, which counts Warburg Pincus as its largest shareholder with 14 per cent, has been keen to exit from the stock for some time.
Cromwell marked the completion of a $1.6bn asset sale program to reduce its debt with the announcement that in May it had sold its European fund management platform and interests to the Deutsche Bank-advised Stoneweg for €280m ($457m), a price close to its sharply written-down book value.
Investment banks Citi and UBS had been working on the transaction.
The next likely development had seemed to be a block trade by ESR to sell down some of its 30 per cent-odd holding, or perhaps a strategic buyer taking the interest.
Yet with such a large exposure to the out-of-favour office sector, many have been left scratching their heads as to who the buyer would be.
The strategy for the Gary Weiss-chaired Cromwell has been to focus on redeploying capital for its key strategy of growing funds under management.
Shares in Cromwell closed on Thursday at 38c, up 0.5c or 1.32 per cent, with its market value at $1.01bn.
ESR inherited the Cromwell stake through its acquisition of the LOGOS industrial property specialist backer ARA Asset Management.
It purchased ARA for $US5.2bn.
Earlier in the year, ESR was said to need the money for other uses.
ESR describes itself as a leading logistics real estate platform with a growing presence in data centres, developing and managing modern logistics and industrial facilities across major economies in the Asia-Pacific.
Its Australian business was established in 2018 and it has a large presence.
It purchased listed real estate investor Propertylink with $1.8bn of assets in 2019 for more than $700m, and in April it bought Blackstone’s Milestone logistics business, consisting of 45 properties, for $3.8bn.
Additional reporting:
The Wall Street Journal
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