ESR to divest $750m in non-core business interests

Hong Kong's ESR will evaluate the sale of its stakes in Cromwell and subscale REITs as it looks to redeploy capital into its core businesses.

Asia Pacific industrial heavyweight ESR will divest some of its non-core business interests as it further streamlines its structure following the company’s rapid expansion via mergers and acquisitions.

The firm has identified up to $750 million of potential non-core divestments where it can redeploy the sale proceeds into one of its three “core pillars” of growth: new economy, alternatives and REITs. Some of the non-core divestments under consideration include the firm’s stakes in Cromwell Property Group as well as some subscale REITs, said Jeffrey Perlman, chairman at ESR, during a webcast on the firm’s FY 2022 financial results held Wednesday.

“We are evaluating our stake in Cromwell. Obviously, it’s a very large position,” said Perlman. Following the acquisition of ARA Asset Management in 2022, ESR had acquired 100 percent of ARA’s interest in Cromwell, which is approximately 30 percent of Cromwell’s shares.

In evaluating the REITs that ESR manages, Perlman wanted to make sure the firm has scalable vehicles. “If those REITs we feel cannot or may not have scale today, but also more importantly, we don’t think can be scaled to a great degree further, then we’re going to look to monetize those. And I think that’s something that is at the top of our priority list,” he noted.

Perlman added that the divestments will be “an important exercise for the group, but it’s also important to note that these type of divestments may take time in order to achieve the right outcome for each.”

Besides divesting its non-core assets, the firm will continue with the integration of ARA’s businesses with ESR as part of the company’s efforts to streamline and simplify its structure.

“We are laser focused on our continued business transformation as well as its simplification, which should help to make it easier to manage the business as well as for public investors to see the power of it,” said Perlman.

Perlman pointed out that the firm has made “real progress” in integrating various aspects of LOGOS, of which ARA had been a majority owner, over the past six to nine months. These include LOGOS’s China and Indonesia businesses as well as its development platform in Singapore. It has also selectively elevated certain LOGOS executives to take on bigger group roles.