ESR achieves excellent monetary and operational outcomes with file highs for FY2022[1]

• Whole AUM^2,3 elevated 11% year-on-year to hit a brand new file of US$156 billion, supercharged by New Financial system AUM^2,3 which delivered 23% progress to achieve US$73 billion
• Whole EBITDA⁴ and PATMI⁵ rose 10% and 9% year-on-year to US$1.15 billion and US$655 million, respectively
• Stabilised Group New Financial system occupancy hit 98%⁶ ex-China with file leasing of 4.6 million⁶ sqm throughout the portfolio and file weighted common rental reversion of seven.5%^6,7
• Largest New Financial system growth workbook in APAC, reaching US$11.9 billion fuelled by file growth begins of US$6.5 billion (up 20% year-on-year) and US$5.5 billion of completions (up 85% year-on-year)
• Sturdy steadiness sheet with wholesome gearing of twenty-two.8%⁸ on the again of energetic capital recycling (US$1.7 billion of belongings) and substantial liquidity (US$1.8 billion in money)
• Obtained ‘AA-‘ International Foreign money Lengthy-term Funding Grade score with a steady outlook from Japan Credit score Score Company
• Returning worth to shareholders with last dividend of HK$12.5 cents per share (1.6 US cents) implying a 1.9%⁹ dividend yield)       

HONG KONG, March 22, 2023 /PRNewswire/ —  ESR Group Restricted (“ESR” or the “Firm”, along with its subsidiaries because the “Group”; SEHK Inventory Code: 1821), APAC’s largest actual asset supervisor powered by the New Financial system, at the moment introduced its outcomes for the monetary yr ended 31 December 2022 (“FY2022”).  

The Group’s Income for FY2022 is US$821 million, up 7.1% from the professional forma Enlarged Group FY2021 income of US$767 million. Whole EBITDA⁴ elevated by 10.2% from US$1.0 billion in professional forma Enlarged Group FY2021 to US$1.15 billion in FY2022. PATMI⁵ grew 9.3% from US$599 million professional forma Enlarged Group FY2021 to US$655 million.  If not for the substantial weak spot of most APAC currencies vs the US greenback in 2022, Whole EBITDA and PATMI would have surged 20% and 24% year-on-year, respectively, vs professional forma Enlarged Group 2021. The upper income was pushed by greater charges from the Group’s Fund Administration section whereas EBITDA was boosted by a rise in price revenue, share of income of co-investments and positive aspects on divestment from steadiness sheet belongings to ESR-managed funds in Australia and China.      

Jeffrey Perlman, Chairman of ESR, stated: “I’m more than happy with the total yr outcomes for the ESR Group.  2022 represented one of the crucial difficult market environments for the reason that international monetary disaster with sustained inflation, file fee hikes and important geopolitical and macro challenges. Even amidst these headwinds and market volatility, ESR has continued to ship stable progress which is a robust testomony to our enterprise mannequin.

With the acquisition of ARA and the continued energetic fundraising exercise, the Group’s complete AUM hit a brand new file.  Our growth begins and completions have scaled considerably to achieve new heights on the again of close to zero vacancies in addition to file leasing (which accelerated additional within the second half of the yr) throughout our present portfolio. To additional seize the beneficial working backdrop, we ramped up our growth workbook (the most important in APAC) in the course of the yr and we count on so as to add substantial begins and completions over the subsequent 12 months with wholesome growth margins. 

We additionally stay very focussed on the Group’s continued transformation and on our aim to simplify the enterprise additional. Our profitable integration of ARA has produced substantial price synergies and we’ve already began integrating elements of the LOGOS enterprise. As we speed up our asset-light technique and streamline our enterprise additional, we’ve recognized as much as US$750 million of potential non-core divestments which can permit us to redeploy the capital again into our 3 core progress pillars going ahead – New Financial system, Options (together with infrastructure and renewables) and REITs.   

The dimensions of ESR is actually outstanding. With 12 of the highest 20 international capital companions on the ESR platform, we stay a trusted associate for main buyers to deploy capital throughout APAC. Regardless of the rising uncertainty out there – geopolitical, future fee hikes, inflation and others, ESR has entered 2023 from a place of elementary energy with a well-capitalised steadiness sheet to reap the benefits of market dislocations and seize on new alternatives. As APAC’s largest actual asset supervisor powered by the New Financial system and the largest REIT platform throughout the area, we’re well-positioned to ship long-term worth for shareholders.”

Delivering sustainable worth to shareholders

Consistent with ESR’s aim of a sustainable dividend coverage, the Board of ESR really useful the declaration of a last dividend of HK$12.5 cents per share (roughly 1.6 US cents per share) (which means a 1.9%⁹ yield) for the second half of the monetary yr ended 31 December 2022. This quantities to a full yr dividend of HK$25 cents per share (roughly 3.2 US cents per share), amounting to roughly US$141 million for the monetary yr ended 31 December 2022. The ultimate dividend shall be paid to Shareholders on Friday, 30 June 2023.

Standout fund administration efficiency backed by deep capital associate relationships

The Group’s Fund Administration section achieved one other yr of excellent efficiency in FY2022, backed by our deep capital associate relationships. Fund Administration Segmental EBITDA¹¹ grew 14.5% to US$568 million, pushed by excessive recurring price income from greater AUM, file growth, leasing charges and stable promotes. The section was propelled by the distinctive progress momentum of the Group’s fund AUM^2,3 which rose 12% year-on-year to US$152 billion, out of which New Financial system AUM^2,3 grew by 23% to US$73 billion, together with a brand new Pan Asia discretionary logistics automobile.  The Group’s Fund Administration section additionally benefitted from ARA’s recurring and steady price income.     

As international institutional buyers sought to rebalance their portfolio allocations in gentle of the expansion in Asia Pacific, the Group raised US$7.6 billion in dedicated capital throughout 28 new or upsized funds and mandates. These included:

• The Group, in partnership with a number one international institutional investor, acquired a chief logistics and industrial portfolio in Larger Shanghai, China. The portfolio, which consists of 11 accomplished logistics and industrial belongings with a complete GFA of over 550,000 sqm, represents the most important logistics and industrial portfolio ever offered in Larger Shanghai.
• US$1 billion inaugural APAC information centre fund which includes a growth pipeline of eight seed tasks with over 260 megawatts of capability.
• The Group’s first US$1 billion infrastructure and renewables fund in ASEAN, in partnership with Export–Import Financial institution of China.
• ESR has dedicated to develop a chief chilly storage and logistics facility at Kwai Chung in Hong Kong via a Joint Enterprise with Chinachem Group.
• First collaboration between ESR and LOGOS within the Pan Asia core plus discretionary fund with US$250 million of preliminary fairness commitments, investing in prime logistics belongings within the APAC area.
• Partnership with GIC on the A$1 billion ESR Australia Improvement Partnership II (EADP II), for a mixed anchor shut of A$540 million, which can additional increase ESR Australia’s technique of delivering premium, sustainable and human-centric designed industrial estates, and the ESR Australia Logistics Partnership III (EALP III) to increase ESR’s core plus logistics technique with fairness commitments of A$600 million.

As well as, in South Korea, ESR upsized its second growth Joint Enterprise with APG and Canada Pension Plan Funding Board by as much as US$1 billion for funding in and growth of a best-in-class industrial and warehouse logistics portfolio. In India, ESR and GIC entered right into a US$600 million Joint Enterprise to spend money on core industrial and logistics belongings within the nation.

The Group has a file US$19.9 billion of “dry powder” (fairness and debt) to capitalise on new alternatives, giving the Group the agility to reap the benefits of market dislocation.

Document excessive leasing and rental reversions with near zero vacancies in most markets

The Group achieved file leasing for FY2022 with 4.6 million sqm⁶ of logistics house leased throughout the portfolio. E-commerce acceleration and provide chain resilience have spurred demand for large-scale fashionable logistics house, representing 76% of recent leases signed in FY 2022. The Group achieved an occupancy fee of 95%⁶ (98%⁶ ex-Larger China), with near full occupancies in Australia/ New Zealand, Japan, India and South Korea. Among the many Group’s prime 10 tenants by revenue, 9 out of ten tenants are e-commerce or 3PL associated.

Excessive occupancy is underpinning robust rental progress in most of the markets by which the Group operates. Particularly, ESR has seen an total constructive weighted common portfolio rental reversion of seven.5%^6,7 which was recorded throughout the New Financial system portfolio and the Group’s portfolio has a weighted common lease expiry (“WALE”) (by revenue) of 4.5 years⁶. With comparatively subdued provide in most of the markets the place it operates and elevated inflation, the Group is positioned to seize outsized rental progress with one-third of its leases due within the subsequent 24 months.      

New Financial system Improvement Phase delivers robust progress  

ESR had over 38 million sqm of GFA in operation and underneath growth throughout its portfolio and a sizeable landbank of over 6 million sqm for future growth as of 31 December 2022.

ESR has a growth work-in-progress (“WIP”) of US$11.9 billion, the most important growth workbook in APAC, offering clear visibility on future price revenue.  Over 80% of WIP is deliberate for completion between 2023 to 2025. The Group achieved a file US$6.5 billion of growth begins in addition to US$5.5 billion in completions which accelerated within the second half of 2022.  The Group considerably elevated its growth begins by 20% year-on-year given the file low emptiness charges throughout APAC, which was additional complemented by growth completions that elevated by 85% year-on-year.

ESR’s core energy as a number one developer of New Financial system actual property in APAC delivered robust New Financial system Improvement Phase EBITDA. The New Financial system Improvement Phase delivered 35% progress year-on-year versus professional forma Enlarged Group FY2021, contributed by file growth completions, share of growth income of the Group’s Joint Enterprise and Associates and honest worth positive aspects of tasks underneath growth.

As well as, ESR’s robust growth pipeline contains a variety of landmark tasks which are set to create new benchmarks out there and drive future charges and growth revenue:

• The Group is creating a US$1.5 billion multi-phase logistics park, ESR Kawanishi Distribution Centre, on a 505,647 sqm web site in Larger Osaka, unveiling one of many largest and most important city rezoning developments to accommodate Japan’s ongoing growth in e-commerce pushed New Financial system actual property.
• The Group can be creating certainly one of Japan’s tallest distribution centres, the nine-storey ESR Higashi Ogishima DC. With a GFA of 365,385 sqm, the double-ramped, high-throughput facility has been master-planned round probably the most premium specs and requirements.
• LOGOS and its companions are within the technique of creating the US$3 billion Moorebank Logistics Park, Australia’s largest intermodal logistics facility at Moorebank in south-western Sydney, into prime quality industrial property and infrastructure together with preliminary approval for 850,000 sqm of warehouse alternatives straight adjoining to key rail intermodal services.
• In Singapore, ESR is partnering with PGIM Actual Property in a build-to-suit redevelopment to construct a 64,490 sqm logistics facility for POKKA, which has signed a 10-year lease to commit a minimal of 70% of the constructing house.

Sturdy capital administration and dedication to an asset gentle technique

ESR had a strong and well-capitalised steadiness sheet with US$1.8 billion in money and a wholesome gearing⁸ of twenty-two.8% as of 31 December 2022. All year long, the Group continued to increase and diversify its funding and capital construction which is essential for fuelling the Group’s long-term progress.

• In January 2022, the Group closed a 5-year JPY28 billion Sustainability-Linked Mortgage (“SLL”), which was upsized to JPY32.5 billion at Tibor +1.75%.
• In Could 2022, the Group closed a 5-year S$370 million SLL at SORA +1.6%.
• In September 2022, the Group closed a 5-year SLL of roughly HK$4.65 billion at Hibor + 1.8%, with an choice to upsize to HK$7 billion. It was additional upsized to HK$8.88 billion subsequent to year-end.

The Group stays focussed on its asset gentle strategy with US$1.7 billion of divestments from its steadiness sheet to ESR managed funds in FY2022, reaching 3 instances its annual historic goal with a particular concentrate on crystalising positive aspects from chosen China steadiness sheet belongings. The sell-down of a      850,000 sqm portfolio in China represented the Group’s largest self-developed steadiness sheet sell-down so far. The Group additionally executed on the profitable tender of its 18.16% holding in China Logistics Property Holdings Co., Ltd in Could 2022, receiving US$349 million and delivering a robust return on this 4-year funding.     

The Group stays very focussed on its asset-light technique with a 7.4% common co-investment as of 31 December 2022, which meaningfully enhances the Group’s tangible return on fairness whereas sustaining enough funding capability throughout the Group.

Laser-focussed on enterprise transformation and simplification anchored by three key pillars of progress

The Group has continued to drive enterprise transformation and simplification to strengthen the Group’s dedication to delivering long-term shareholder worth via the next:

• The Group has achieved roughly US$15 million of price synergies from the combination of ARA, exceeding its goal plan, and efficiently built-in a part of the LOGOS enterprise. The Group expects to create further synergies because it additional integrates varied facets of the LOGOS enterprise over the subsequent 12 months.
• As a part of its precedence to streamline and additional simplify the enterprise, the Group divested its 18.16% stake in China Logistics Property Holdings with a considerable acquire and is evaluating a further as much as US$750 million of non-core divestments with the plan to redeploy the capital again into core areas of progress.
• In accelerating its asset gentle trajectory, the Group plans to divest one other roughly US$1 billion of steadiness sheet belongings in 2023. The Group has additionally additional lowered its co-investment stake to 7.4%, putting it in place to tackle better growth capability with out rising its present steadiness sheet annual commitments.
• The Group’s enterprise transformation backed by its asset gentle mannequin has supplied the Group with sturdy liquidity to redeploy the capital again into its New Financial system focus areas. This contains creating its information centre platform with the primary shut of the US$1 billion ESR Information Centre Fund and investing in market leaders via its current strategic funding and partnership with BW Industrial Improvement in Vietnam to supply best-in-class growth, leasing and different fund administration providers to the corporate.

On the again of robust secular traits, the Group will concentrate on three pillars of progress – New Financial system, Options (together with infrastructure and renewables) and REITs.  With e-commerce increasing at 10% throughout APAC via 2025, hyperscale information centres rising at a 30%+ CAGR via 2025, and heightened concentrate on R&D and prescription drugs attributable to the pandemic, the Group will proceed to grab alternatives to deploy capital into sectors together with information centres, logistics, life sciences and high-tech industrial.  The New Financial system Pillar will in flip gasoline the expansion of the Group’s Options segments similar to infrastructure and renewables in addition to its REIT enterprise. With the most important quantity of rooftop house in APAC, the Group began an formidable rollout of photo voltaic tasks with the assist of its capital companions. These renewable alternatives will energy New Financial system belongings similar to information centres and chilly storage throughout the Group. As well as, with the APAC REIT market anticipated to develop by a 12% CAGR to achieve US$1.3 trillion of market capitalisation by 2030, ESR is in a novel place to develop its REITs over time. ESR’s capital companions are more and more turning to the Group to promote down high-quality belongings and there’s constructive REIT laws that may proceed to open new markets and alternatives for the Group throughout the area. The Group’s potential C-REIT spinout is a testomony to how REITs stay because the pure takeout of New Financial system belongings upon stabilisation. 

Main the way in which ahead in ESG as an enlarged Group

Because the launch of its ESG 2025 Roadmap in November 2020, the Group has made important progress throughout the three key pillars underneath its ESG Framework – “Human Centric”, “Property Portfolio” and “Company Efficiency”. With the profitable acquisition of ARA, ESR continues to drive best-in-class sustainability practices as a unified platform to create sustainable worth for its stakeholders.

Over the previous yr, the Group has strengthened its company core values as an enlarged Group to strengthen and uphold variety, fairness and inclusion within the office, with a robust concentrate on sustainability. To construct a extra inclusive and equitable office, ESR elevated its proportion of ladies in senior administration positions to roughly 40% and continues to foster a human centric tradition throughout the Group. Testomony to its dedication to well being and security, and well-being of its stakeholders, the Group labored intently with native authorities and business our bodies to take care of zero ESR workforce fatalities for its workers.

On the environmental entrance, the Group has put in near 100 MW of rooftop solar energy capability throughout its belongings globally, in step with its ESG 2025 roadmap to maximise onsite renewable power era and sources within the transition to a low carbon future. In Japan, ESR is the primary actual asset supervisor to work with Enerbank to subject Renewable Power Certificates (“RECs“) to tenants from solar energy generated from its belongings’ rooftops. The Group additionally continues to pursue its goal of acquiring sustainable constructing certificates for 50% of its portfolio, as a part of its efforts to boost operational effectivity.

ESR efficiently turned a signatory to the United Nations-supported Rules of Accountable Funding (“UNPRI“) in June 2022 and has secured roughly US$3 billion in sustainability-linked loans so far, reinforcing its dedication to adopting and selling accountable funding and asset administration practices throughout the Group. Consistent with worldwide ESG benchmarks and international rankings, ESR continues to be recognised for its sturdy and exemplary ESG disclosure practices with creditable 2022 rankings within the World Actual Property Sustainability Benchmark (“GRESB“) Evaluation, MSCI ESG Rankings and Sustainalytics ESG Threat Rankings. As an enlarged Group, ESR shall be issuing its inaugural FY2022 ESG Report, aligned to the World Reporting Initiative (“GRI“) Requirements, which shall be revealed concurrently with its Annual Report finish April 2023.

Wanting forward

The Group stays assured within the robust fundamentals and future prospects for actual belongings. E-commerce acceleration and digital transformation will proceed to drive demand for logistics infrastructure and information centres, ESR’s core progress pillar. 

Jeffrey Shen and Stuart Gibson, ESR Co-founders and Co-CEOs, stated: “Whereas the Group stays cautious in regards to the altering exterior surroundings, we’re in a robust place to climate any unexpected headwinds and capitalise on alternatives which will current themselves. ESR will proceed to additional strengthen our market-leading place in New Financial system actual property and our REITs throughout APAC whereas beginning to construct up a scaled infrastructure and renewables platform. We stay focussed on accelerating our asset gentle trajectory, sustaining price self-discipline which continues to drive fund administration EBITDA margin enchancment and additional diversify our funding sources and decrease our borrowing prices.

As well as, our ambition is to push ahead our ESG and sustainability efforts, embedding them in all facets of our operations as we embark on our Group-wide ESG 2025 Roadmap to form a low carbon and local weather resilient future.”

Notes

¹Within the pursuits of offering a extra uniform illustration of the expansion achieved, the Group’s FY2022 outcomes have been in comparison with the professional forma Enlarged Group for FY2021 as if the ARA acquisition had already been accomplished.  Comparisons to the stand-alone ESR Group with out the ARA acquisition (which was accomplished on 20 Jan 2022) are additionally supplied within the comparability desk for monetary outcomes.

²Primarily based on fixed FX translation as of 31 December 2021 for a like-for-like comparability. Primarily based on FX translation as of 31 December 2022, complete AUM could be US$145 billion (US$11 billion FX translation influence), New Financial system AUM could be US$68 billion (US$5 billion FX translation influence) and Fund AUM could be US$142 billion (US$10 billion FX translation influence).

³ Refers back to the sum of (i) the honest worth of the properties held within the personal funds and funding automobiles we handle; (ii) the entire uncalled capital commitments within the personal funds and funding automobiles; (iii) the extra debt that’s estimated to be incurred just about the goal leverage ratio of the related personal funds and funding automobiles we handle when all capital is named and invested; and (iv) the appraised carrying worth of listed REITs.

⁴ Whole EBITDA excludes amortisation of intangibles and transaction prices regarding ARA and M&A associated objects similar to discount buy, share of honest worth on funding properties and monetary belongings at honest worth via revenue or loss and monetary devices in relation to sure Associates; in addition to share-based compensation expense. Statutory Whole EBITDA is US$1,068 million.

⁵ PATMI excludes amortisation of intangibles and transaction prices regarding ARA and M&A associated objects similar to discount buy, share of honest worth of funding properties and monetary belongings at honest worth via revenue or loss and monetary devices in relation to sure Associates. Statutory PATMI is US$574 million.

⁶ Stabilised New Financial system belongings solely. Excludes listed REITs and Associates.

⁷ Weighted by AUM.

⁸ Web Debt/Whole Property.

⁹ Primarily based on closing share worth of HK$13.26 on 21 March 2023.

¹⁰ Excludes development revenue associated to the sale of development arm by ESR Australia.

¹¹Excludes amortisation of intangibles and transaction prices regarding ARA and M&A associated objects similar to discount buy, share of honest worth on funding properties and monetary belongings at honest worth via revenue or loss and monetary devices in relation to sure Associates. Reclassification of Cromwell underneath Funding section to mirror the present asset heavy nature of the funding.

About ESR

ESR is APAC’s largest actual asset supervisor powered by the New Financial system and the third largest listed actual property funding supervisor globally. With US$156 billion in complete belongings underneath administration (AUM), our totally built-in growth and funding administration platform extends throughout key APAC markets, together with China, Japan, South Korea, Australia, Singapore, India, New Zealand and Southeast Asia, representing over 95% of GDP in APAC, and likewise contains an increasing presence in Europe and the U.S. We offer a various vary of actual asset funding options and New Financial system actual property growth alternatives throughout our personal funds enterprise, which permit capital companions and prospects to capitalise on probably the most important secular traits in APAC. ESR is the most important sponsor and supervisor of REITs in APAC with a complete AUM of US$46 billion. Our objective – Area and Funding Options for a Sustainable Future – drives us to handle sustainably and impactfully and we take into account the surroundings and the communities by which we function as key stakeholders of our enterprise. Listed on the Essential Board of The Inventory Alternate of Hong Kong, ESR is a constituent of the FTSE World Fairness Index Sequence (Massive Cap), Grasp Seng Composite Index and MSCI Hong Kong Index. Extra info is on the market at www.esr.com.

For extra info on ESR, please go to www.esr.com.

SOURCE ESR Group Restricted