Highlights:

  • With a slew of projects in the Asia Pacific, the group can build data centers with a combined server capacity of 250 megawatts and a GVA of over USD 10 billion.
  • In August, ESR announced that it has acquired ARA for USD 5.2 billion and aims to create the biggest real estate asset manager in the Asia-Pacific region.

ESR Cayman and ARA Asset Management’s Logos are raising two complementary funds to raise a total of USD 2.5 billion to bankroll the enlarged group’s expansion into the growing data center space across the Asia Pacific region. They aim to replicate their success as the biggest landlord for e-commerce giants across the region.

Hong Kong-based ESR, which will soon form an alliance with Singapore’s ARA Asset Management and Logos, will expectedly complete the first closing for the data center development funds by mid-2022, said Jeffrey Perlman, ESR chairman, in an interview.

In August, ESR announced that it has acquired ARA for USD 5.2 billion and aims to create the biggest real estate asset manager in the Asia-Pacific region with assets worth USD 130 billion under management. The two companies moved to combine their Singapore-based units, ESR REIT and ARA Logos Logistics Trust, in a separate deal. Both transactions will get completed in the first quarter of 2022.

The merger will transform both entities into the largest new economy property platform in the Asia Pacific with AUM exceeding USD 50 billion that comprises mainly logistics assets. The group has been tapping into data centers to meet the rising demand for digital infrastructure. Some of the company’s biggest logistics tenants include Amazon, Alibaba, and JD.com.

ESR is building the biggest data center project in Japan’s Osaka. After completion, it is expected to have a Gross Asset Value (GAV) of over USD 2 billion. Furthermore, the company also plans to redevelop an industrial asset into a data center. The asset was purchased by it in May from the family of a noted tycoon, the late Tang Shing Bor. When completed, its GVA will stand at USD 675 million.

With a slew of projects in the Asia Pacific, the group can build data centers with a combined server capacity of 250 megawatts and a GVA of over USD 10 billion. Perlman expects data centers to eventually account for as much as 15% of the group’s new economy property portfolio. This  includes cold storage facilities and modern warehouses for cloud kitchens.

The Asia Pacific region has seen a spur in data centers in recent times owing to the growth of digital platforms, e-commerce portals and video conferencing. The data center market is expected to see double growth to about USD 60 billion by 2027 from USD 26 billion in 2020, as per a study published by Research and Markets. The combined entity, ESR and ARA, is backed by some of the biggest investors, including Canada’s Oxford Properties and Warburg Pincus. Other investors include ARA co-founder John Lim and Singapore billionaire Jeffrey Shen as its most notable investors.

Expert view

“The rapid growth of e-commerce has only accelerated during the pandemic,” Perlman says. “Digital transformation is ongoing in our daily lives. We’re using Zoom, and Teams every day and all that data need to be stored somewhere. It’s stored in the cloud and so there’s a continued need for data centers.”