ESR Group Delivers Growth in AUM and Fund Management EBITDA on the Back of Strong Operating Performance
Key Highlights:
-
Record Fund Management EBITDA1 of
US$579 million constituting ~60% of total Group segmental EBITDA; excluding promote fees, Fund Management EBITDA1 grew 8.9% year-on-year ("y-o-y") -
Total AUM
3,8
and Fee-related AUM2,3 increased by 7.3% to
US$156.1 billion and 6.3% y-o-y toUS$81.1 billion , respectively on the back ofUS$7.5 billion of new capital raised -
Stabilised New Economy occupancy4,5 remains at 98% ex-
China with record leasing of 5.3 million sqm4 across the portfolio and strong rental reversions4,6 of 14.3% ex-China -
Consistently developing and delivering high value projects at scale, with US$
6.3
billion of development starts and
US$4.2 billion of development completions -
Successfully executing on its non-core divestment plan with the sale of ARA Private Funds business; other divestments continue to progress with the goal of fully realising up to
US$750 million -
Targeting
US$1.5-2 billion of balance sheet asset sell-downs over the next twelve months to ESR-managed vehicles to enhance recurring fee revenue and reduce leverage -
Recent substantial investment by
Starwood Capital further validates ESR's market-leading position -
Continued focus on shareholder returns with a final dividend of
HK$12.5 cents per share (1.6 US cents), implying a 2.9% dividend yield7
ESR's integrated fund management and development platform in APAC delivered increased fund management earnings on higher fee-related assets under management2,3 ("AUM") and strong operating fundamentals. This improvement came despite a challenging macroeconomic environment that included a material change in the interest rate environment and one of the weakest fundraising environments on record.
Fee-related AUM2,3 as at end
The Group achieved record Fund Management EBITDA1 of
The Group's revenue was up by 6% from
|
FY 2023 |
FY 2022 |
Variance (%) |
AUM
3,8
|
156.1 |
145.5 |
7.3 % |
Fee-Related AUM2,3 (US$ billion) |
81.1 |
76.3 |
6.3 % |
Revenue |
871 |
821 |
6.1 % |
Fund Management EBITDA1 / ex-Promote Fees (US$ million) |
579 / 397 |
568 / 365 |
1.9% / 8.9% |
EBITDA9
|
885 |
1,152 |
(23.1 %) |
PATMI10 |
400 |
655 |
(38.8 %) |
Commenting on the results,
The Co-CEOs further commented: "On the operating side, New Economy demand has supported our record leasing activity, allowing us to achieve close to full occupancy in several key markets with double digit rent renewals being achieved across APAC (ex-
Additionally, we continue to be anchored on our asset-light approach, which includes reducing our balance sheet exposure in
Focused on delivering sustainable value to shareholders
In line with ESR's goal of a sustainable dividend policy established in 1H2022, the
Healthy capital raising amid a challenging environment
Despite a second consecutive year of muted fundraising for the sector, the Group worked closely with capital partners to achieve a capital raise of
- ESR's largest-ever
RMB Income Fund inChina with a seed portfolio from ESR's balance sheet - A further upsize for the
ESR Data Centre Fund (ESR DC Fund 1) toUS$1.35 billion , which represents a pipeline of up to 575 MW -
LOGOS's Green Data Centre Fund to invest in build-to-suit data projects across APAC with an identified pipeline of 350 MW
In the first quarter of 2024, the Group successfully raised approximately
As at
Balance Sheet Optimisation
ESR has progressed its asset light strategy through further syndication of balance sheet assets, with
Laser-focused on business transformation and simplification
With its focus on New Economy, the Group identified up to
The Group is also working towards the final stages of the LOGOS integration over the balance of the year. The successful integration will deliver a combined
Resilient operating performance and continued diversification
Operating fundamentals for the Group's New Economy assets remain strong and the Group leased a record of 5.3 million sqm4 of space in 2023. As at
The Group maintains a well-staggered lease expiry profile with WALE of 4.6 years4 (by income).
Large New Economy development workbook to fuel future earnings growth
As at
In terms of work-in-progress, it is similarly diverse, with 52% comprising projects in
ESR's strong development pipeline includes numerous landmark projects which will create new benchmarks in the market and drive future fees and development profit:
- Data Centres are expected to be an increasing contribution to the Group, with 24% of development starts in FY2023. The Group will have 575 MW upon the completion of 8 sites (including a 100% pre-leased site in
Hong Kong andIndia ). In addition, the Group's pipeline of land and projects will contribute more than one additional gigawatt (1 GW+). - In
Australia and New Zealand , LOGOS is currently developingAustralia's largest intermodal logistics precinct, the Moorebank Intermodal Precinct (MIP) in south-westernSydney , with initial approval for 850,000 sqm of warehouse opportunities directly adjacent to key rail intermodal facilities to accessAustralia's rail infrastructure. When fully developed, MIP will have an estimated value ofA$4.2 billion . LOGOS has also partnered with Amazon Australia andAustralianSuper to develop a second Amazon Robotics fulfilment centre inMelbourne .ESR Australia and Toll Group have committed approximatelyA$420 million to invest into a next-generation Retail Distribution and Fulfilment Facility at ESR Australia'sWestlink Industry Park , where Toll has committed to a 10-year lease. - In
Japan , capitalising on strategic opportunities and investor interest, the Group is developing aUS$1.5 billion multi-phase logistics park, ESR Kawanishi Distribution andTechno Park on a 500,000 sqm site located inGreater Osaka , making it one of the largest and most significant urban rezoning developments to accommodateJapan's ongoing expansion in e-commerce. - In
South Korea , where rental demand remains strong with limited supply in strategic locations, the Group is developing aUS$800 million logistics park, Busan New Port on a 685,475 sqm land site located inGreater Busan , the country's largest container terminal and the world's sixth largest port by volume. - In
Southeast Asia , a significant growth market for the next decade, the Group has expanded intoThailand where it is developing the 253,000 sqm Asia Industrial Estate Suvarnabhumi and has commenced a built-to-suit development for Nasdaq-listed Advanced Energy's flagship factory within the ESR Asia Laem Chabang industrial estate.
Proactive capital management
Proactive capital management strategies have ensured ample liquidity with an aggregated
The Group has expanded and diversified its funding and capital structure during the year:
- Received an investment grade first-time 'AA-' rating with a stable outlook from the
Japan Credit Rating Agency, Ltd inMarch 2023 - Received
AAA (Stable Outlook) fromChina Chengxin International Credit Rating Co., Ltd. , one of the top rating agencies in Mainland China inSeptember 2023 - Launched two series of Japanese Yen denominated fixed rate bonds in
July 2023 : (i)JPY20 billion 1.163% fixed rate notes due 2026; and (ii)JPY10 billion 1.682% fixed rate notes due 2030, under itsUS$2 billion Multicurrency Debt Issuance Programme - Secured
US$4 billion of sustainability-linked/green loans and closedJPY30 billion of Japanese Yen-denominated, fixed rate bonds inJuly 2023 , resulting in a better-optimised debt currency profile with USD-denominated loans reduced to 17% of total debt as at end 2023, thereby reducing weighted average interest cost by 30 basis points from 5.6% in 1H2023 to 5.3% for FY2023.
Forging ahead for a sustainable future
ESR's purpose is Space and Investment Solutions for a Sustainable Future. This drives the Group to manage sustainably and impactfully and consider the environment and the communities in which the company operates as key stakeholders.
The Group has made significant progress against its targets set out under its ESG 2030 Roadmap, which was launched in
Under the social domain, the Group continues to advocate diversity, equity, and inclusion in the workplace, uphold employee health and safety, drive employee engagement, and scale up community investment. As at end-2023, female representation is approximately 45%. Across the Group, community investment efforts continue to be implemented under three dedicated focus areas, namely: "Strengthening Social Resilience, Health and Well-being", "Promoting Education & Upskilling", in addition to "Protecting the Environment".
The Group is committed to developing and maintaining sustainable and efficient buildings and increasing sustainable building certifications and ratings. As at end-2023, 110 MW of rooftop solar power capacity, as well as 850 EV charging stations, have been installed across the portfolio. Synergistic partnerships, including in some cases with tenants, have been launched as part of the Group's efforts to transition to a low-carbon future. Approximately 42% of ESR's portfolio of completed, directly managed assets have obtained sustainable building certifications and ratings such as LEED, WELL and NABERS.
From a governance perspective, the Group is committed to upholding the utmost standards of corporate governance to ensure accountability, transparency, fairness, and integrity across all its operations. Over the past year, the Group embarked on preparatory work for its inaugural
Notes
1
Fund Management EBITDA excludes the share of fair value of financial derivative assets in relation to certain Associates.
2
Fee-related AUM excludes AUM from Associates and levered uncalled capital.
3
Based on FX rates as
4
New Economy assets only. Excluding REITs portfolios.
5
Stabilised New Economy assets only.
6
Weighted by AUM of each respective country.
7
Based on closing share price of
8
Total AUM included the reported AUM of the Associates and assumed the value of the uncalled capital commitments in the private funds and investment vehicles on a levered basis.
9
Refers to EBITDA, which excludes the share-based compensation expense, share of fair value on investment properties and financial assets at fair value through profit or loss and financial derivative assets in relation to certain Associates, as well as impairment loss for non-core business; and in 2022 which also excluded the transaction costs related to the ARA Acquisition.
10
Refers to PATMI, which excludes the amortisation of intangible asset attributable to the ARA Acquisition (net of tax), share-based compensation expense related to ARA, share of fair value on investment properties and financial assets at fair value through profit or loss and financial derivative assets in relation to certain Associates, as well as impairment loss for non-core business; and in 2022 which also excluded transaction costs related to the ARA Acquisition.
11
Based on development pipeline, including landbank.
About ESR
ESR is APAC's largest real asset manager powered by the New Economy and one of the largest listed real estate investment managers globally. With over
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