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This would see Challenger sell its Australian real estate business, CRE, to Elanor for $42 million in new securities issued by Elanor.
Upon completion, Challenger’s holding in Elanor would be approximately 18 per cent of total Elanor securities.
Challenger and Elanor would establish a strategic partnership, which would include an exclusive distribution arrangement where Challenger’s multi-affiliate business, Fidante, would distribute Elanor’s existing and new funds, and Elanor would become Challenger’s commercial real estate partner in Australia and New Zealand.
The transaction would also involve new investment management agreements between Challenger Life and CRE third-party clients with Elanor, representing approximately $3.4 billion of funds under management, invested across retail, office and industrial assets.
A Challenger representative would join the Elanor board.
Challenger managing director and chief executive, Nick Hamilton, said: “The combination of Challenger’s real estate platform with Elanor will provide a significant uplift in capability and scale.
“Challenger will benefit from both alignment and access to growth via the acquisition of a strategic stake in Elanor, and we are excited to continue to grow the real estate platform together with the Elanor team.”
Elanor’s chief executive, Glenn Willis, added: “We are pleased to have executed on a key strategic objective of the group to grow AUM through the acquisition of a significant real estate funds management platform. This is a transformational transaction for Elanor.
“Combining Elanor’s real estate funds management capability with Challenger’s market-leading capital raising platform delivers significant size and scale benefits, and positions us for further strong growth.”
Challenger Bank sale nears completion
The move to sell its real estate business comes as Challenger rationalises its presence after a strategic review concluded that it should instead be focusing on its life and funds management businesses.
Last year, Heartland Group Holdings Limited (Heartland) agreed to buy digital lender Challenger Bank Limited (Challenger Bank), as part of this move.
The value of the deal — expected to complete in June 2023 — is estimated to be around $36 million (subject to adjustments for net assets delivered at completion).
It included its $89 million of retail lending, $17 million of corporate lending and $228 million of deposits, as well as its origination system (which Heartland flagged was capable of reverse mortgage origination).
Speaking of the deal last year, Mr Hamilton said: “We have conducted extensive analysis and considered the future strategic value of the bank and its ability to contribute to Challenger’s purpose of providing our customers with financial security for a better retirement.
“The sale will allow us to focus on our life and funds management businesses and leverage the scale we can achieve through strategic partnerships.
“The bank will now be positioned for long-term success under Heartland’s ownership and will benefit both the bank’s employees and its customers.”
[Related: Heartland to acquire Challenger Bank]