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(i) the names of the merger parties;
- ARA Logistics Ventures I Limited (“ARA Logistics”);
- LOGOS China Investments Limited and its affiliates(“LOGOS GROUP”)
(collectively, the "Parties", each a“Party”).
(ii) a description of the transaction;
The proposed transaction relates to the proposed acquisition by ARA Logistics Ventures I Limited of LOGOS China Investments Limited(“LOGOS”)(“the Proposed Transaction”).
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
ARA Logistics is majority-held (indirectly) by ARA Asset Management Holdings Pte. Ltd. (“ARA”). ARA is a premier global integrated real assets fund manager, based in Singapore, with country desks across key cities in Australia, China, Europe, Japan, Korea and the US. As at 30 June 2019, the gross assets managed by the ARA group of companies and its associates (“ARA Group”) are more than S$83 billion across over 100 cities in 23 countries. ARA takes an investor-cum-operator approach, and is a fully integrated investment and fund management platform with in-house resources, and extensive experience in investing, managing and divesting real estate assets.
ARA Group’s core business activities are:
(a) real estate development;
(b) real estate management;
(c) real estate space for rental;
(d) convention and exhibition services; and
(e) fund management services in respect of property funds (for retail and accredited/institutional investors)
LOGOS is a company incorporated in the British Virgin Islands and is the holding company of the LOGOS Group. The LOGOS Group’s principal business is the management of funds which acquire, develop and operate logistics properties in Asia Pacific, including Singapore. LOGOS has A$4 billion (approx. S$3.8 billion) of equity commitments across 14 ventures with a targeted end-value of AUM of over A$9 billion (approx. S$8.5 billion).
LOGOS Group’s core business activities are:
(a) real estate development;
(b) real estate management;
(c) industrial real estate space for rental; and
(d) fund management services in respect of property funds (for accredited and institutional investors) which invest in industrial real estate assets.
(iv) a description of the overlapping goods or services, including brand names;
The applicant Party, ARA Logistics, submits that the only overlaps between the ARA Group and the LOGOS Group are for the supply of the following goods and services in Singapore:
(a) industrial real estate space for rental, specifically warehouse space; and
(b) fund management services in respect of property funds (for accredited and institutional investors) which invest in industrial real estate assets,
(collectively, the “Overlapping Goods and Services”).
The applicant Party further submits that while ARA Group and LOGOS Group technically overlap in respect of the provision of real estate development services and real estate management services, these services are provided only for real estate properties that fall within the assets that they manage, and not market-facing to third parties.
The brand names used by entities controlled by ARA Group in Singapore include:
(a) ARA;
(b) Cache Logistics Trust;
(c) APM;
(d) Suntec;
(e) Suntec REIT; and
(f) ARA US Hospitality Trust.
The brand name used by entities controlled by LOGOS Group in Singapore is “LOGOS”.
(v) a description of substitute goods or services;
The applicant Party submits that:
Industrial real estate space for rental
(a) From a demand-side perspective, there are no close product substitutes to industrial real estate space as the Singapore government imposes guidelines for the use of industrial space. Different types of industrial properties generally target different tenant segments and tenants typically need facilities customised to their specific operational needs. However, between various types of industrial real estate, there may be some degree of demand-side substitutability.
(b) From a supply-side perspective, there are no close product substitutes to industrial real estate space as the Singapore government allocates land based on specific purposes, in accordance with the guidelines on land use. However, the Singapore government releases land regularly to meet the demand for industrial real estate space. Further, it is relatively easy for real estate players specialising in other property types in particular to move easily and quickly to supply industrial real estate space for rental.
Fund management services in respect of property funds (for accredited and institutional investors) which invest in industrial real estate assets
(a) From a demand-side perspective, investors are generally interested in investing in asset classes that meet their specific investment profiles and would accordingly consider the different asset classes that meet their investment profiles to be substitutable with one another. Even for investment products which are not directly substitutable for real estate assets based on the investor’s individual investment profile, there is a chain of substitution between these investment products as each product can be directly substitutable with several other investment products which have common features (e.g. transaction cost, risk profile, returns).
(b) As regards supply-side substitution, it is relatively easy for fund managers providing other investment products of different asset classes to switch or reposition from offering one type of investment product to another, given the low barriers to entry, expansion and repositioning of expertise between the different types of investment products.
(vi) The applicant's views on:
a. definition of the relevant market(s);
The applicant Party submits that overall, for the purposes of this notification, the narrowest relevant markets are:
(a) the supply of industrial real estate space for rental with possible segmentation by warehouse space, factory space and business park space in Singapore; and
(b) the supply of fund management services for industrial real estate assets worldwide.
(collectively, the “Relevant Markets”)
b. the way in which competition functions in this market;
The applicant Party submits the following:
Industrial real estate space for rental
(a) Industrial real estate space for rental is supplied on a national basis (i.e. Singapore) due to the immovable nature of real estate properties. In Singapore, the market for the supply of industrial real estate space for rental is highly competitive and end customers (i.e. tenants) generally have a wide range of choice in selecting a suitable property that fits their requirements.
(b) The key competitive parameters that tenants would look out for include the property specifications, rental rates and general rental terms.
Fund management services
(c) Fund management services can be supplied on both a global and national basis, as investors do not face significant barriers in being able to place their capital outside Singapore if they wish to do so. Foreign fund managers also do not face significant barriers in being able to offer fund management services for industrial real estate to investors in Singapore as they are not required to obtain a CMS license or be registered with MAS if they manage funds which invest only in real estate assets and only deal with institutional and accredited investors.
(d) The key competitive parameters which investors look out for include the quality of portfolio assets, the experience and track record of the fund manager, the quality of fund management advice/service provided, the level of management fees and expenses charged for services (amongst others).
c. barriers to entry and countervailing buyer power
The applicant Party submits the following:
(a) There are no significant barriers to entry into any of the Relevant Markets. The main barrier to entry for suppliers of industrial real estate space is in obtaining industrial land or space. Since 2012, however, the Singapore government has started introducing smaller plots with shorter tenures in the IGLS scheme to ensure that industrial land stays affordable for small industrialists, allow flexibility in land rejuvenation and enable the supply of industrial real estate space to keep up with market demand. Some key barriers to entry for fund managers include the need for fund managers to have access to appropriate research capabilities to make recommendations to clients. However, none of these barriers to entry are prohibitive or particularly difficult to overcome.
(b) The Relevant Markets for the Overlapping Goods and Services are characterised by large, sophisticated customers (i.e. investors and tenants) that are able to easily, and at relatively low cost, switch to different suppliers.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
Non-coordinated effects
The applicant Party submits that the Proposed Transaction will not give rise to any non-coordinated effects for the following reasons:
(a)presence of large, established competitors, which includes the major industrial REITS and new entrants for the supply of industrial real estate space for rental, and competitors from within and outside of Singapore for fund management services;
(b) the absence of significant barriers to entry and expansion, for the supply of industrial real estate space for rental, includes the Singapore government’s initiative to offer smaller industrial plots with shorter tenures to ensure affordability of industrial real estate space for rental, and for fund management services, the ability of investors to place their capital within and outside Singapore with local and foreign fund managers;
(c) high countervailing buyer power by sophisticated customers, such as tenants for the rental of industrial real estate space which are large MNCs and 3PL providers, and institutional investors for fund management services; and
(d)the overall low incremental market shares for each of the Relevant Markets.
Coordinated effects
The applicant Party submits that the Proposed Transaction will not give rise to any coordinated effects for the following reasons:
(a)there are numerous competitors in the Relevant Markets, and the ease of switching by, customers in the industry creates strong commercial incentives for suppliers to continue pricing competitively. This reduces the sustainability of coordinated behaviour and makes it difficult for competitors to align their behaviour; and
(b)absence of significant barriers to entry in the supply of the Overlapping Goods and Services generally, and accordingly high potential for increased competition, which similarly creates disruptive effects and reduces sustainability of any coordinated behaviour.
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