Unlocking Opportunities: ESR-REIT and ARA LOGOS Logistics Trust Fireside Chat

Table of Contents

1. Introduction
2. The Paradigm Shift in the New Economy
3. The Merger Between ESR Cayman and ARA Asset Management
4. The Benefits of Scale in the New Economy
5. Access to Capital and Competitive Cost of Debt
6. Addressing the Risk of Land Lease Decay
7. The Fairness of the Merger Deal for ALOG Unitholders
8. The Potential Upside and Future Milestones
9. Conclusion

The Merger Between ESR-REIT and ARA LOGOS: A Transformational Opportunity in the New Economy

In recent times, the concept of size has become increasingly important in the world of real estate investment trusts (REITs). This is especially true in the Context of the New Economy, where the way we produce, Consume, and deliver goods and services has undergone a significant paradigm shift. In light of this changing landscape, the CEOs of ESR-REIT and ARA LOGOS have come together to discuss the merger between the two REITs and the numerous advantages it offers to unitholders.

1. Introduction

The Fireside Chat kicks off with a discussion on the importance of scale and the reasons behind the merger between ESR-REIT and ARA LOGOS. The CEOs emphasize that size matters in the New Economy, particularly in terms of attracting capital inflows and taking AdVantage of the growing demand for New Economy assets. They also address the timing of the merger, explaining that the paradigm shift driven by technology and e-commerce has been expedited by the COVID-19 pandemic.

2. The Paradigm Shift in the New Economy

The CEOs Delve deeper into the paradigm shift occurring in the New Economy, highlighting how it is reshaping the way goods and services are produced, consumed, and delivered. They discuss the unique opportunity presented by this disruption and explain how the enlarged REIT, ESR-LOGOS REIT, is well-positioned to capitalize on the demand for logistics assets and high-spec properties suitable for data centre operators and advanced manufacturers. They also note that investors have recognized this shift and are allocating their capital to New Economy assets.

3. The Merger Between ESR Cayman and ARA Asset Management

The CEOs touch upon the merger between ESR Cayman and ARA Asset Management, clarifying any misconceptions about its connection to the merger between ESR-REIT and ARA LOGOS. They emphasize that the primary driver behind the merger is the opportunity to capitalize on the New Economy and the demand for New Economy assets.

4. The Benefits of Scale in the New Economy

The CEOs Outline the benefits of scale and size in the New Economy. They explain how merging ESR-REIT and ALOG will enable the enlarged REIT, ESR-LOGOS REIT, to attract larger capital inflows and compete more effectively in the marketplace. The CEOs highlight the shift in investor preferences towards larger managers and emphasize the importance of becoming a sizable player to take advantage of the opportunities presented by the New Economy.

5. Access to Capital and Competitive Cost of Debt

The CEOs discuss the access to capital and the competitive cost of debt that the merger will bring about. They provide examples of the advantageous terms they have already secured, such as a 2.25% loan to refinance ALOG's existing loans. They also explain the potential benefits of obtaining a credit rating for the enlarged REIT, which would make it more attractive to bond investors and further reduce funding costs.

6. Addressing the Risk of Land Lease Decay

One of the inherent risks associated with industrial assets in Singapore is the short-term land lease. The CEOs address this concern and explain how the merger will allow the enlarged REIT to mitigate the risk of land lease decay. By gaining access to longer-dated land lease assets in the Sponsor's pipeline, the enlarged REIT can reduce the equity premium demanded by investors and potentially have a positive impact on share prices.

7. The Fairness of the Merger Deal for ALOG Unitholders

The CEOs address feedback from ALOG unitholders regarding the perceived fairness of the merger deal. They clarify that the transaction is a merger, not an acquisition, and ALOG unitholders will be rolling over into the enlarged REIT rather than selling out. They argue that the offer price of 95 cents reflects the positive attributes already priced into ALOG's unit price and emphasize the DPU accretion and NAV accretion that will be beneficial to ALOG unitholders.

8. The Potential Upside and Future Milestones

Looking towards the future, the CEOs discuss the potential upside and milestones for the enlarged REIT. Key priorities include executing the immediate visible and executable pipeline of acquisitions, addressing short land lease issues, and rebalancing the portfolio through the divestment of non-Core assets. They also highlight the importance of the enlarged REIT's capital structure and the possibility of obtaining a credit rating, which would enhance access to funding and improve corporate governance.

9. Conclusion

In conclusion, the merger between ESR-REIT and ARA LOGOS represents a transformational opportunity for both REITs. The CEOs reiterate the significance of size and scale in the New Economy and emphasize the advantages that the merger brings, including access to capital, competitive cost of debt, and the ability to tap into the Sponsor's pipeline. They assure unitholders that the merger is fair and will Create long-term value, positioning the enlarged REIT for growth and success in the ever-evolving real estate market.

Highlights

1. Size and scale are crucial in the New Economy, allowing REITs to capitalize on the paradigm shift driven by technology and e-commerce.
2. The merger between ESR-REIT and ARA LOGOS provides the enlarged REIT, ESR-LOGOS REIT, with the opportunity to tap into the growing demand for New Economy assets.
3. Access to capital and competitive cost of debt are key advantages of the merger, enabling the enlarged REIT to fund acquisitions and optimize its capital structure.
4. The merger addresses the inherent risk of land lease decay associated with Singapore industrial assets, reducing the equity premium demanded by investors.
5. The deal is fair for ALOG unitholders, offering DPU accretion and NAV accretion, as well as the opportunity to participate in the future upside of the enlarged REIT.
6. Future milestones include executing the pipeline of acquisitions, addressing short land lease issues, and obtaining a credit rating for the enlarged REIT.
7. The merger represents a transformational opportunity for both ESR-REIT and ALOG, positioning them as a benchmark New Economy APAC S-REIT and a top player in the industry.

FAQ

Q: Why is size important in the New Economy? A: Size is crucial in the New Economy as it allows REITs to attract capital inflows, take advantage of the growing demand for New Economy assets, and compete effectively in the marketplace.

Q: How does the merger address the risk of land lease decay? A: The merger allows the enlarged REIT to gain access to longer-dated land lease assets in the Sponsor's pipeline, reducing the risk of land lease decay and potentially positively impacting share prices.

Q: Is the merger deal fair for ALOG unitholders? A: Yes, the merger deal is fair for ALOG unitholders as it offers DPU accretion, NAV accretion, and the opportunity to participate in the future upside of the enlarged REIT.

Q: What are the future milestones for the enlarged REIT? A: Future milestones include executing the pipeline of acquisitions, addressing short land lease issues, and obtaining a credit rating for the enlarged REIT to enhance access to funding and improve corporate governance.