ESR Exploring Sale of Stake in SGX-Listed Cromwell European REIT

Hong Kong-listed ESR goals to divest at the least $1 billion in belongings this yr because it continues to concentrate on its fund administration enterprise, and people disposals might embody its stake in Cromwell European REIT.

In an earnings webcast on Wednesday, chairman Jeffrey Perlman mentioned ESR was contemplating a possible sale of the corporate’s stake in Singapore-listed CEREIT. The industrial specialist inherited its slice of the $2.8 billion belief when it acquired ARA Asset Management in early 2022.

“We’re evaluating our stake in Cromwell, as well as subscale REITs in our portfolio that we don’t feel we can grow to a meaningful size and scale,” Perlman mentioned. “We feel this can recycle up to $750 million of capital to the group and we can use that capital to deliver fee-generating AUM and make our business easier to understand in the process.”

His remarks got here as Singapore-listed REITs of international belongings proceed to battle, with Manulife US REIT final week confirming that it’s presently in discussions with Mirae Asset Global Investments relating to a possible sale of shares in the belief of US workplace properties following a strategic assessment.

Rethinking Europe

As Europe’s property sector faces rising headwinds and rising bond yields dampen the enchantment of S-REITs, some big-name funding managers are reconsidering their methods.

Late final yr, US-based BlackRock bought 59,900 items of CEREIT, leaving the agency beneath the 5 p.c threshold to be thought of a considerable unitholder and subsequently now not topic to disclosing curiosity or change in curiosity in the belief’s voting shares. Over the previous 12 months the belief’s share value has slid by greater than 31 p.c, regardless of rising 3.31 p.c because the begin of 2023.

CEREIT’s supervisor has warned that it expects transaction exercise to decelerate in the close to time period and that the main focus will stay on asset and capital recycling moderately than acquisitions.

Share costs of S-REITs have plunged over the previous yr amid a pointy rise in rates of interest and hovering inflation. Rising yields on Singapore authorities securities have supplied an interesting different to REITs for risk-averse traders.

After ESR made $1.1 billion value of divestments in China final yr, Perlman mentioned mainland belongings will proceed to make up a big portion of the properties to be bought this yr to deep-pocketed native traders in search of logistics belongings, in addition to providing potential portfolio belongings for ESR’s a lot anticipated China-listed REIT.

“We’re looking to further double down in areas where we believe we can create or invest in market leaders, which includes our data centre platform and our inaugural data centre fund, as well as our recent strategic investment in BW Industrial,” Perlman mentioned, referring to the Vietnam-based warehouse developer. “We’re transforming and simplifying our business with a strong focus on ESR’s three core pillars of growth, namely new economy, alternatives and REITs.”

Healthy Financials

ESR on Wednesday reported a ten p.c improve in revenue final yr, propelled by progress in payment earnings and disposals of non-core belongings.

The group’s earnings earlier than curiosity, tax, depreciation and amortisation jumped to $1.15 billion in 2022 from $1 billion a yr earlier (for the corporate and its then soon-to-be-absorbed ARA unit), as progress in payment earnings from its fund administration enterprise boosted total group income to $821 million — up 7.1 p.c from 2021.

ESR’s belongings beneath administration rose 11 p.c year-on-year to an all-time excessive of $156 billion in 2022, after the corporate accomplished its $5.2 billion acquisition of ARA and notched fundraising successes that expanded its money for deployment to a file $19.9 billion.