ESR Cayman Limited (ESRCAY) is the largest Asia Pacific-focused logistics real estate platform by gross floor area and development pipeline. The company engages in logistics property development, investment, and fund management. It operates in China (32% of FY20 revenue), Japan (25%), Australia (17%), South Korea (16%), Singapore (8%), and India/others (2%). As at 31 December 2020, ESRCAY’s assets under management was US$29.9bn, of which 64% of leased area was leased to e-commerce and third-party logistics tenants.
Commentary
- Largest owner of logistics property in South Korea.
- Largest in China by development pipeline.
- Backed by investors including Warburg Pincus, APG, CPP Investments, Oxford Properties, PGGM and SK Holdings.
- Robust logistics investment climate. ESRCAY achieved record leasing of over 2.3mn sqm in FY20 and record new development starts of US$3.2bn. E-commerce adoption acceleration driven by the pandemic.
- Strong balance sheet. As at 31 December 2020, the group had US$1.5bn in cash, which is almost half of its US$3.3bn of total borrowings and double its short term borrowings of US$734mn. US$650mn cash was raised through the listing of ESR Kendall Square REIT in Korea on December 2020. Net debt to assets stood at 23.2%, allowing for substantial headroom for acquisitions. In FY20, the group secured a record US$3.5bn capital commitments from its capital partners to enter FY21 with US$3.7bn in unfunded investible capital.
Highlights from ESR Cayman’s roadshow:
- Heavy under-allocation into APAC logistics. ESRCAY is one of the 3 big players in APAC with strong track record, thus management sees no issue with capital raising. The industry is continuing to see steady inflows of capital into APAC logistics, even by GIC. ESRCAY’s 20% tie up with GIC for a A$3.8bn Australia acquisition was hotly contested.
- APAC logistics demand set to continue. Valuations are cheap compared to the U.S. where developmental spread is only 50bps compared to APAC of 200-250bps. Management dubbed today the golden era for APAC logistics and expects the trend to continue for the considerable future.
- ESRCAY’s internal comfortable gearing level is 30%. As at 31 December 2020, gearing stood at 24%.