Singapore REITs consolidate as Warburg Pincus-backed ESR-REIT seeks merger

SINGAPORE (Reuters) - ESR-REIT and rival Viva Industrial Trust are in exclusive talks for a merger, which if completed, would mark the first consolidation among Singapore’s crowded mid-cap real estate investment trusts.

ESR-REIT, which is backed by Asian logistics developer e-Shang Redwood (ESR) - a venture of private equity firm Warburg Pincus and large global investors, said on Monday that its manager had submitted a proposal to merge it with Viva.

The proposed deal is expected to create the fourth-largest industrial REIT in Singapore, with an overall asset size of about S$3.0 billion ($2.3 billion), ESR-REIT said in a statement.

“The objective is to create a sizeable and liquid industrial REIT with an Asian footprint well supported by a developer sponsor financially and across the real estate value chain,” ESR-REIT said.

In a separate statement, Viva said it had received the merger proposal. Both companies cautioned that there was no certainty of a deal.

ESR-REIT is valued at S$747 million ($572 million) and Viva has a market value of S$907 million ($694 million). ESR-REIT units were flat in afternoon trade, while units of Viva were up 2 percent at S$0.955.

Reuters reported on Friday that ESR-REIT and Viva were in merger talks.

The property portfolio of both companies comprises general industrial, logistics, warehouses and business parks.

“An enlarged ESR-REIT will also benefit from a significant increase in market capitalization, trading liquidity, investor coverage and potential index inclusion,” ESR-REIT said.

In November, ESR Funds Management (S) Ltd, the manager of ESR-REIT, and Sabana Shariah Compliant Industrial REIT called off their talks, which sources said were focused on ESR-REIT buying Sabana REIT.

Citigroup Global Markets Singapore, RHB Securities Singapore and United Overseas Bank Ltd are the financial advisers to ESR-REIT’s manager on the merger proposal while Merrill Lynch (Singapore) is the financial adviser to Viva.

Reporting by Anshuman Daga and Aradhana Aravindan; Editing by Sunil Nair