ESR Cashes In with $1bn Asset Recap Deal

ESR has inked a $1-billion deal to recap a prime logistics portfolio in China holding more than 873,000sq m of gross floor area, the biggest sell-down in the company’s history. 

Asia Pacific’s largest real asset manager is disposing of its stake to a new China income venture, ECN IV Offshore Holdings, which is owned by subsidiaries of GIC and ESR. 

According to an ESR statement, it is the company’s largest sell-down of a self-developed balance sheet portfolio and it plans to recycle the capital back into opportunities across the region. 

ESR co-founder Jeffrey Shen said the transaction was in line with their asset-light strategy with a further 24.3 million sq m of property in the development pipeline.

“Despite some near-term macro and geopolitical headwinds, this transaction is a further validation that institutional investors are increasingly drawn to the compelling long-term income potential of well-located, premium quality logistics portfolios in China developed by ESR,” Shen said.

“This transaction also represents the largest sell-down of ESR self-developed balance sheet assets to date.

“It is in line with ESR’s focus on accelerating its asset-light strategy, which is an integral part of our long-term growth plan. 

“With the completion of this sell-down, ESR Group is well-positioned to achieve another record capital recycling year as we seek to take advantage of increasingly more attractive pipeline opportunities across APAC and build on the strength of our integrated platform, balance sheet, capital partners and customers to deliver long-term sustainable growth.”

The China portfolio was 98 per cent occupied and comprised nine completed logistics and industrial assets with a gross floor area of more than 873,000sq m across major industrial hubs in the Yangtze River Delta Region, the Greater Bay Area and the Beijing-Tianjin-Hebei region. 

▲ One of the structures at ESR Tianjin Wuqing Park.

Almost two-thirds of the assets within the portfolio were developed by ESR.

In 2021 ESR sold down more than $1 billion from its balance sheet, which resulted in more than $700 million in cash being returned to the group for growth

Industrial continues to be a strong market across the Asia Pacific despite lower volumes of transactions, according to CBRE.

Industrial and logistics transactions were down at $3.5 billion for the first half of 2022, compared with $10.6 billion for the same period in 2021.

But vacancy rates have also dropped further, now down at 0.8 per cent nationally.