ESR plans to create more real estate investment trusts and expand its data center business after posting a banner year in 2021, according to its chairman, Jeffrey Perlman.
The Hong Kong-listed fund management giant saw its assets under management jump 32% year-on-year to a record high of $39.4 billion in 2021 and posted record profit attributable to shareholders of $377 million, based on its unaudited annual financial statements released late Thursday.
“2021 was another banner year for ESR, which was further punctuated by the transformational acquisition of ARA to create APAC’s largest real-asset manager powered by the new economy,” the group’s chairman said. ESR, Jeffrey Perlman. “As financial partners seek to deploy more and more capital with fewer managers in Asia Pacific, ESR Group strives to deliver a single, fully integrated solution that will be powered by the leading real estate platform of the new economy with $59 billion in assets under management and a development WIP (work in progress) of more than $10 billion across the Asia-Pacific region.
Perlman noted that the company has also set new records in other aspects of its business, including leasing, fundraising and development project launches – which he says allow the group to focus on the continued development of light assets, the expansion of its data center business and the promotion of REITs. which he sponsors as he progresses until 2022.
Japan and China strengthen their profits
ESR’s net income attributable to owners for 2021 rose 31.7% from $286.5 million reported a year earlier, as the company links its improved performance to increased fund co-investments , associates and joint ventures, as well as lower borrowing costs.
This increase in profits came despite revenue rising just 4.1% to $404.4 million in 2021 from $388.3 million the previous year. While the group’s revenues in Japan and China jumped 47% and 31% respectively, Australia saw revenues drop 38% and in India revenues fell 8.4%. Revenues from South Korea and Singapore both grew 9%, year-over-year.
The company’s leasing activity in 2021 also hit an all-time high with more than 3.3 million square meters (35.5 million square feet) of total space leased last year and a rate of occupancy climbing to 94% from 89% a year earlier, driven by huge demand from the e-commerce sector.
With $59 billion in new economy assets – which includes logistics and data centers – the segment now represents 54% of ESR’s total assets under management, which is by far the largest portfolio in the new economy. in Asia-Pacific.
The Warburg Pincus-backed group completed its $5.2 billion acquisition of Singapore-based ARA Asset Management in January, which more than quadrupled the expanded ESR group’s total assets under management to 140.2 billion at the end of 2021, up from around $30 billion in 2020.
Investor commitments to ESR funds have also helped boost business, with the company raising $5.8 billion in new capital commitments last year across nine vehicles and partnerships, an increase of $64 billion. % compared to 2020.
Currently, the Hong Kong-listed company’s portfolio spans 25.5 million square meters of combined space in both operation and development across Asia Pacific. In terms of value, it has $7.1 billion in projects under construction, a 51% year-over-year increase, and began work on $3.3 billion projects the last year.
In addition to its growing development pipeline, ESR has also grown via acquisition in 2021, with the group’s Australian unit partnering with Singapore’s GIC to acquire Blackstone’s Milestone logistics portfolio for $2.9 billion.
Data centers, REITs in the spotlight this year
As ESR aims to expand its business in 2022, Perlman said the company will seek opportunities to free up at least $1 billion in capital, in part by divesting $800 billion or more of its existing assets, China being one of its main targets for disposals.
“If the markets continue to remain constructive and investors obviously continue to have the appetite, which we are still seeing today, then we expect to be able to sell lower and even top what we did in 2021. in terms of selling down,” he said during a briefing on Thursday evening.
Referring to ESR’s established pool of stabilized assets in China, Perlman said, “We will recycle assets that demonstrably have material value. So that’s a big chunk of that capital recycling, and our goal is to exceed over $1 billion in capital recycling.
The 38-year-old executive said his company will also continue to grow its data center platform, which currently has six assets still under development in Hong Kong, Osaka, Sydney, Mumbai, Jakarta and Singapore, which account for a total of 260 megawatts total. power capacity.
The company plans to expand that portfolio this year through a pipeline of digital infrastructure assets it has curated in Tokyo, Osaka, Seoul, Beijing and Taipei, as well as plans to launch its complementary inaugural funds for data centers. data this year. Prior to last year’s merger, ESR and Logos announced separate data center vehicles.
“Beyond the continued growth of e-commerce, digital transformation is well underway, with data consumption increasing fourfold in the past five years alone in Asia. With the construction of the ESR data center, the efforts were aimed at addressing the critical need for digital infrastructure in a big way in the future,” he said.
The logistics specialist launched its first data center development in April 2021 with a $2.15 billion project in Osaka.
After unitholders overwhelmingly approved the proposed merger of ESR-REIT and ARA Logos Logistics Trust earlier this week, ESR also plans to expand the pool of REITs it sponsors this year and to develop those that already exist.
“We believe the REIT sector is poised to take off across Asia Pacific. For the remainder of the decade, JLL forecasts growth of up to $1 trillion in additional market capitalization. We believe there are many opportunities for us to build REITs in China, Japan, Australia, India and Southeast Asia in areas that are both diverse and new economy,” Perlman added.