Viewpoint.com On March 21, esr released its 2023 financial report and also held a performance meeting.
As of December 31, 2023, esr's total asset management scale was US$156.1 billion, a year-on-year increase of 7.3%; fee-related asset management scale was US$81.1 billion, a year-on-year increase of 6.3%; in terms of ebitda, esr achieved a record of innovation Record fund management ebitda was US$579 million, accounting for nearly 60% of total revenue and growing 8.9% year-on-year.
In terms of revenue, it increased by 6% from 821 million yuan in 2022 to US$871 million in 2023; in addition, the total construction area also increased, from 45 million square meters in 2022 to 48.8 million square meters. In addition to observing the intuitive changes in financial data,
is also worth noting that esr said it will continue to optimize the balance sheet.
esr expects to have completed over $500 million in announced transactions, with plans to close a further $1.5-2 billion in transactions over the next 12 months. These planned sales to companies managed by esr and the announced sales of non-core assets are expected to reduce the Group's gearing ratio in the medium term, bringing it to the low end of the Group's target gearing ratio of between 20% and 30%. And the interest savings from lowering the gearing ratio will increase potential distributions or fund future share repurchases.
slim down to-dolist
html On March 11, esr announced that it would sell its interests in the ara private equity fund business in Australia, Singapore, South Korea and the United States to various entities such as sumitomo mitsui finance and leasing co.'s affiliates at an initial consideration. Business-based agreed enterprise value of US$270 million (subject to adjustment). The board of directors ofesr has determined to divest up to US$750 million from ara's non-core businesses, and the sale is the first of such divestments. The sale aims to streamline and simplify the group's business and enable the group to focus more on developing new economic segments, and the cash generated from the sale will mainly be used to reduce the group's debt. Behind the sale of
is esr's determination to reduce its asset-liability ratio. Its current asset-liability ratio in 2023 is 30.7%, and management mentioned its debt target for 2024 at the performance meeting: to reduce its assets by the end of the year. The gearing ratio is reduced to approximately 25% and portfolio interest costs are reduced through the dual effects of portfolio reduction and interest rate cuts.
is still 5.7% away from the target. In other words, esr needs to reduce debt by US$923 million this year (total asset value in 2023 is US$16.191 billion).
The management also stated at the performance meeting that the priority in 2024 is to apply these projects (namely, the balance sheet syndication project announced in 2023, 2 internal projects and the non-core business divestment project signed in March 2024 ) to repay US$700 million and US$500 million of high-interest loans, which will mature in 2024 and 2026 and have interest rates exceeding 7%.
Looking at the bonds issued by esr, there are only two US dollar bonds with coupon rates exceeding 7%, the rest are less than 7%, and the average interest rate is 4.75%.
Therefore, compared with the average interest rate of these 8 bonds, the repayment of the US$1.2 billion high-interest loan mentioned by management seems urgent. Just as esr said that the repayment of these two loans can reduce the debt ratio to 25% approximately, and is expected to save US$40 million in interest costs annually.
Viewpoint New Media learned that management also expressed the hope to issue panda bonds in China in fiscal year 2024, that is, foreign institutions issue bonds denominated in RMB in China and conduct fixed interest rate swaps, that is, both parties to the transaction Exchange cash flow in the form of different interest rates within a certain period of time (this is a measure of risk management), swap part of the floating interest rate for a fixed interest rate, thereby reducing the weighted average interest cost from 5.% to less than 5%.
In addition, esr will promote its asset-light strategy by further selling assets on its balance sheet, with Greater China being the focus of continued reductions and sales activities.
In China, the largest amount in the esr asset sales list was that on November 27, 2023, esr, as the seller, transferred its 6 domestic logistics park assets to Taikang Insurance, with a total transfer price of 2.038 billion yuan.The six assets of
are distributed in the Yangtze River Delta, the Greater Bay Area and the Beijing-Tianjin-Hebei region, with a total construction area of approximately 349,600 square meters and expected revenue to reach 338 million yuan. After the transaction is completed, esr no longer holds these assets, but is held indirectly by Taikang Insurance's RMB income fund.
stated in the announcement at the time that the group's sale of the target company's interests to the investment funds managed by the group would help obtain sales proceeds and is in line with the capital transfer of assets on the balance sheet to the investment vehicles it manages and co-invests. cycle strategy.
Combined with its overall goal of balance sheet optimization throughout the entire performance meeting, this logistics asset transfer but enjoying partial management rights in the assets is not only a form of ESR's light asset output, but also a balance sheet It is a natural part of the overall weight loss framework.
New economy business with high hopes
Whether it is selling ara's non-core business interests and focusing on new economy business or the new economy project disclosed in its 2023 annual report with an investment amount of 13 billion US dollars, it can be seen that esr's new economy business Pay attention to.
's new economic business covers not only logistics, but also emerging growth areas such as data centers and life sciences. According to its performance meeting disclosure, its new economy tenants ranked first and second in terms of revenue share, respectively, Coupang and JD Group.
Revenue proportion of the top ten new economy tenants
Data source: esr fy2023 results presentation, opinion index compilation
Viewpoint New Media learned that Coupang is the largest e-commerce platform in South Korea, and its core businesses include e-commerce, online retail, and self-service. Self-operated product distribution, electronic payment, and video streaming service coupang play with operating sales model. As a third-party platform that provides warehousing,
has also signed an agreement with skp lug hyverse (skph) and coupang fulfilment services (cfs, a subsidiary of coupang) on September 19, 2022 to cooperate in the development and operation of South Korea's first An environmentally friendly hydrogen-powered logistics center.
It is understood that esr, skph and cfs will cooperate to develop esr’s existing mokcheon logistics park and plan to develop it into a hydrogen-powered logistics park. mokcheon Logistics Park covers an area of 148,000 square meters and is currently held by cfs leasing.
Such tenants are e-commerce companies, and the logistics park uses new energy power. The "double buff" is esr's emphasis on new economic business.
In addition, in the Frederic Kunshan Logistics Park, the underlying asset of AVIC Yishang REIT, which was declared by esr some time ago, JD.com exists as its largest tenant. In the previous conversation with esr, esr also mentioned For JD.com, Fulid's main role is to serve as a distribution warehouse, and because of its promise of fast delivery, a distribution warehouse close to the urban area has become a necessity. Although JD.com also has the Asia No. 1 project near Kunshan, it is not used as a distribution warehouse. This has increased JD.com’s stickiness to Fulaid Logistics Park. According to its performance announcement,
said that the performance of the new economic development segment decreased by 24.2% from US$343 million in fiscal year 2022 to US$260 million in fiscal year 2023. The decrease was mainly due to the decline in the fair value income of esr's investment in South Korea.
But at the same time, esr also stated that it remains optimistic about the demand for new economic assets in the Asia-Pacific region. Driven by the development and growth of e-commerce, technological advancements in artificial intelligence and life sciences, and the rise of renewable energy under the trend of energy transformation, new Economic assets will continue to benefit from the favorable long-term structural situation.
