ESR Group announced on Mar 6 that is has received conformation from the Stock Exchange of Hong Kong (HKSE) that it may proceed with its proposed transaction for a publicly offered infrastructure securities investment fund or C-REIT on the Shanghai Stock Exchange. The seed assets are likely to be three high-specification logistics projects located in Kunshan, Jiangsu Province, the PRC, currently wholly owned by the Group via Jiangsu Friend Warehouse Co.
The three logistics projects are strategically located in prominent hubs of the country's last mile logistics networks and have a total area of over 427,000 sqm. Jiangsu Friend Phase I is a fully-leased, stabilised asset with a gross floor area (GFA) of over 135,000 sqm Jiangsu Friend Phase II, has over 85,000 sqm of GFA and Jiangsu Friend Phase III has the largest area out of the three phases with a total GFA of over 206,000 sqm. The three assets have been stabilised since 2018.
Based on UBS’s recent analysis, the C-REIT market could reach as much as US$1.2 trillion in market capitalisation by 2030 if China could just securitise 2% of its infrastructure assets (which are valued at US$60 trillion).
ESR will continue to progress on its approvals from the relevant regulatory authorities, including but not limited to the National Development and Reform Commission (NDRC), the China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange, the announced said.
Stuart Gibson and Jeffrey Shen, Co-founders and Co-CEOs of ESR Group stated: “We are pleased to obtain HKSE’s approval for ESR to proceed with this proposed C-REIT transaction. As the leading manager of REITs in APAC, we strongly believe in the continued financialization of real estate in APAC and especially in China. The proposed transaction is also a testament to ESR’s focus on accelerating our asset-light strategy. Through injecting our assets in private funds and REITs, we continue to grow our fund management fee revenue while also recycling capital into attractive opportunities across APAC to further build long-term sustainable growth. We are excited that our proposed transaction is in line with the Chinese government’s support of the securitization of infrastructure projects and we are confident that the proposed transaction will reinforce our market leadership and open a new and exciting growth engine for the Group in China.”
Chang Rui Hua, Managing Director and Group Head of Capital Markets and Investor Relations, said: “The burgeoning C-REIT market in China is propelled by many of the secular trends that underpin ESR’s growth and it offers investors another option to enhance and diversify their portfolios. ESR has a strong track record of managing many successful REITs across various geographies and asset classes. Our proposed C-REIT will benefit from the accelerated growth of ecommerce and continued resilience of the supply chain which will drive the demand for modern logistics facilities. Furthermore, the Chinese local government’s focus on growing leading industries including ecommerce, digital economy, intelligent equipment manufacturing and life sciences, will all require high quality logistics and industrial space.” ESR has a total AUM of US$32 billion and approximately 13.9 million sqm of GFA in China as of June 30, 2022.
