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

• Complete AUM^[2],[3] elevated 11% year-on-year to hit a brand new report of US$156 billion, supercharged by New Financial system AUM^[2],[3] which delivered 23% progress to achieve US$73 billion
• Complete EBITDA^[4] and PATMI^[5] 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 report leasing of 4.6 million^[6] sqm throughout the portfolio and report weighted common rental reversion of seven.5%^[6],[7]
• Largest New Financial system growth workbook in APAC, reaching US$11.9 billion fuelled by report 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 property) and substantial liquidity (US$1.8 billion in money)
• Acquired ‘AA-‘ International Forex Lengthy-term Funding Grade score with a steady outlook from Japan Credit score Score Company
• Returning worth to shareholders with ultimate 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 this time introduced its outcomes for the monetary 12 months 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. Complete EBITDA^[4] elevated by 10.2% from US$1.0 billion in professional forma Enlarged Group FY2021 to US$1.15 billion in FY2022. PATMI^[5] grew 9.3% from US$599 million professional forma Enlarged Group FY2021 to US$655 million.  If not for the substantial weak point of most APAC currencies vs the US greenback in 2022, Complete 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 larger charges from the Group’s Fund Administration phase whereas EBITDA was boosted by a rise in payment revenue, share of earnings of co-investments and positive factors on divestment from steadiness sheet property to ESR-managed funds in Australia and China.      

Jeffrey Perlman, Chairman of ESR, mentioned: “I’m more than happy with the total 12 months outcomes for the ESR Group.  2022 represented one of the vital difficult market environments because the world monetary disaster with sustained inflation, report fee hikes and vital geopolitical and macro challenges. Even amidst these headwinds and market volatility, ESR has continued to ship strong progress which is a powerful 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 report.  Our growth begins and completions have scaled considerably to achieve new heights on the again of close to zero vacancies in addition to report leasing (which accelerated additional within the second half of the 12 months) throughout our current portfolio. To additional seize the beneficial working backdrop, we ramped up our growth workbook (the biggest in APAC) through the 12 months and we anticipate 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 purpose to simplify the enterprise additional. Our profitable integration of ARA has produced substantial price synergies and we’ve got already began integrating elements of the LOGOS enterprise. As we speed up our asset-light technique and streamline our enterprise additional, we’ve got 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, Alternate options (together with infrastructure and renewables) and REITs.   

The size of ESR is really outstanding. With 12 of the highest 20 world capital companions on the ESR platform, we stay a trusted companion for main traders to deploy capital throughout APAC. Regardless of the rising uncertainty available in the market – geopolitical, future fee hikes, inflation and others, ESR has entered 2023 from a place of elementary power with a well-capitalised steadiness sheet to make the most of market dislocations and seize on new alternatives. As APAC’s largest actual asset supervisor powered by the New Financial system and the most important REIT platform throughout the area, we’re well-positioned to ship long-term worth for shareholders.”

Delivering sustainable worth to shareholders

According to ESR’s purpose of a sustainable dividend coverage, the Board of ESR really useful the declaration of a ultimate dividend of HK$12.5 cents per share (roughly 1.6 US cents per share) (which suggests a 1.9%^[9] yield) for the second half of the monetary 12 months ended 31 December 2022. This quantities to a full 12 months dividend of HK$25 cents per share (roughly 3.2 US cents per share), amounting to roughly US$141 million for the monetary 12 months ended 31 December 2022. The ultimate dividend will probably be paid to Shareholders on Friday, 30 June 2023.

Standout fund administration efficiency backed by deep capital companion relationships

The Group’s Fund Administration phase achieved one other 12 months of excellent efficiency in FY2022, backed by our deep capital companion relationships. Fund Administration Segmental EBITDA^[11] grew 14.5% to US$568 million, pushed by excessive recurring payment income from larger AUM, report growth, leasing charges and strong promotes. The phase 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 car.  The Group’s Fund Administration phase additionally benefitted from ARA’s recurring and steady payment income.     

As world institutional traders 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 world institutional investor, acquired a primary logistics and industrial portfolio in Better Shanghai, China. The portfolio, which consists of 11 accomplished logistics and industrial property with a complete GFA of over 550,000 sqm, represents the biggest logistics and industrial portfolio ever offered in Better Shanghai.
• US$1 billion inaugural APAC knowledge centre fund which contains 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 primary chilly storage and logistics facility at Kwai Chung in Hong Kong by way of 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 property within the APAC area.
• Partnership with GIC on the A$1 billion ESR Australia Growth Partnership II (EADP II), for a mixed anchor shut of A$540 million, which can additional broaden ESR Australia’s technique of delivering premium, sustainable and human-centric designed industrial estates, and the ESR Australia Logistics Partnership III (EALP III) to broaden 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 property within the nation.

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

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

The Group achieved report leasing for FY2022 with 4.6 million sqm^[6] of logistics area leased throughout the portfolio. E-commerce acceleration and provide chain resilience have spurred demand for large-scale trendy logistics area, representing 76% of recent leases signed in FY 2022. The Group achieved an occupancy fee of 95%^[6] (98%^[6] ex-Better 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 lots of the markets wherein the Group operates. Specifically, ESR has seen an total optimistic 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 years^[6]. With comparatively subdued provide in lots 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 Growth Phase delivers robust progress  

ESR had over 38 million sqm of GFA in operation and below 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 biggest growth workbook in APAC, offering clear visibility on future payment revenue.  Over 80% of WIP is deliberate for completion between 2023 to 2025. The Group achieved a report 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 report low emptiness charges throughout APAC, which was additional complemented by growth completions that elevated by 85% year-on-year.

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

As well as, ESR’s robust growth pipeline contains various landmark tasks which are set to create new benchmarks available in the market and drive future charges and growth revenue:

• The Group is growing a US$1.5 billion multi-phase logistics park, ESR Kawanishi Distribution Centre, on a 505,647 sqm website in Better Osaka, unveiling one of many largest and most vital city rezoning developments to accommodate Japan’s ongoing growth in e-commerce pushed New Financial system actual property.
• The Group can also be growing 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 strategy of growing the US$3 billion Moorebank Logistics Park, Australia’s largest intermodal logistics facility at Moorebank in south-western Sydney, into top 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 area.

Strong capital administration and dedication to an asset gentle technique

ESR had a sturdy and well-capitalised steadiness sheet with US$1.8 billion in money and a wholesome gearing^[8] of twenty-two.8% as of 31 December 2022. All year long, the Group continued to broaden 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 Might 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 method 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 selected give attention to crystalising positive factors from chosen China steadiness sheet property. The sell-down of a 850,000 sqm portfolio in China represented the Group’s largest self-developed steadiness sheet sell-down to this point. The Group additionally executed on the profitable tender of its 18.16% holding in China Logistics Property Holdings Co., Ltd in Might 2022, receiving US$349 million and delivering a powerful 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 adequate 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 bolster the Group’s dedication to delivering long-term shareholder worth by way of 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 numerous elements 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 an extra 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 property in 2023. The Group has additionally additional lowered its co-investment stake to 7.4%, inserting it in a superb place to tackle larger growth capability with out rising its current steadiness sheet annual commitments.
• The Group’s enterprise transformation backed by its asset gentle mannequin has supplied the Group with strong liquidity to redeploy the capital again into its New Financial system focus areas. This contains creating its knowledge centre platform with the primary shut of the US$1 billion ESR Knowledge Centre Fund and investing in market leaders by way of its current strategic funding and partnership with BW Industrial Growth in Vietnam to supply best-in-class growth, leasing and different fund administration providers to the corporate.

On the again of robust secular developments, the Group will give attention to three pillars of progress – New Financial system, Alternate options (together with infrastructure and renewables) and REITs.  With e-commerce increasing at 10% throughout APAC by way of 2025, hyperscale knowledge centres rising at a 30%+ CAGR by way of 2025, and heightened give attention to R&D and prescribed drugs brought on by the pandemic, the Group will proceed to grab alternatives to deploy capital into sectors together with knowledge centres, logistics, life sciences and high-tech industrial.  The New Financial system Pillar will in flip gas the expansion of the Group’s Alternate options segments similar to infrastructure and renewables in addition to its REIT enterprise. With the biggest quantity of rooftop area 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 property similar to knowledge 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 singular place to develop its REITs over time. ESR’s capital companions are more and more turning to the Group to promote down high-quality property and there may be optimistic 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 property upon stabilisation. 

Main the best way ahead in ESG as an enlarged Group

For the reason that launch of its ESG 2025 Roadmap in November 2020, the Group has made vital progress throughout the three key pillars below 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 12 months, the Group has bolstered its company core values as an enlarged Group to strengthen and uphold variety, fairness and inclusion within the office, with a powerful give attention to sustainability. To construct a extra inclusive and equitable office, ESR elevated its proportion of girls 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 carefully 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 property globally, in keeping with its ESG 2025 roadmap to maximise onsite renewable vitality 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 difficulty Renewable Vitality Certificates (“RECs“) to tenants from solar energy generated from its property’ 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 Ideas of Accountable Funding (“UNPRI“) in June 2022 and has secured roughly US$3 billion in sustainability-linked loans to this point, reinforcing its dedication to adopting and selling accountable funding and asset administration practices throughout the Group. According to worldwide ESG benchmarks and world rankings, ESR continues to be recognised for its strong and exemplary ESG disclosure practices with creditable 2022 rankings within the International Actual Property Sustainability Benchmark (“GRESB“) Evaluation, MSCI ESG Scores and Sustainalytics ESG Threat Scores. As an enlarged Group, ESR will probably be issuing its inaugural FY2022 ESG Report, aligned to the International Reporting Initiative (“GRI“) Requirements, which will probably be printed concurrently with its Annual Report finish April 2023.

Trying forward

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

Jeffrey Shen and Stuart Gibson, ESR Co-founders and Co-CEOs, mentioned: “Whereas the Group stays cautious concerning the altering exterior surroundings, we’re in a powerful place to climate any unexpected headwinds and capitalise on alternatives that 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 elements of our operations as we embark on our Group-wide ESG 2025 Roadmap to form a low carbon and local weather resilient future.”

Notes

^[1] Within 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.

^[2] Based mostly on fixed FX translation as of 31 December 2021 for a like-for-like comparability. Based mostly 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 full 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 known as and invested; and (iv) the appraised carrying worth of listed REITs.

^[4] Complete EBITDA excludes amortisation of intangibles and transaction prices referring to ARA and M&A associated gadgets similar to discount buy, share of honest worth on funding properties and monetary property at honest worth by way of revenue or loss and monetary devices in relation to sure Associates; in addition to share-based compensation expense. Statutory Complete EBITDA is US$1,068 million.

^[5] PATMI excludes amortisation of intangibles and transaction prices referring to ARA and M&A associated gadgets similar to discount buy, share of honest worth of funding properties and monetary property at honest worth by way of revenue or loss and monetary devices in relation to sure Associates. Statutory PATMI is US$574 million.

^[6] Stabilised New Financial system property solely. Excludes listed REITs and Associates.

^[7] Weighted by AUM.

^[8] Web Debt/Complete Belongings.

^[9] Based mostly on closing share value of HK$13.26 on 21 March 2023.

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

^[11] Excludes amortisation of intangibles and transaction prices referring to ARA and M&A associated gadgets similar to discount buy, share of honest worth on funding properties and monetary property at honest worth by way of revenue or loss and monetary devices in relation to sure Associates. Reclassification of Cromwell below Funding phase to replicate 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 property below 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 clients to capitalise on probably the most vital secular developments in APAC. ESR is the biggest sponsor and supervisor of REITs in APAC with a complete AUM of US$46 billion. Our function – Area and Funding Options for a Sustainable Future – drives us to handle sustainably and impactfully and we think about the surroundings and the communities wherein we function as key stakeholders of our enterprise. Listed on the Most important Board of The Inventory Change of Hong Kong, ESR is a constituent of the FTSE International Fairness Index Collection (Massive Cap), Dangle 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