On Jan 29, ESR-REIT’s manager announced it had signed a commitment letter for $320.0 million new loan facilities on an unsecured basis, with The Hongkong and Shanghai Banking Corporation, Malayan Banking, RHB Bank and United Overseas Bank Limited. The new loan facilities, comprising a $160.0 million five-year term loan facility and a $160.0 million four-year revolving credit facility, are intended to be used to refinance the $31.0 million and $160.0 million loans due in June 2021 and October 2021, respectively.
During a results briefing on Jan 20, Adrian Chui, CEO of ESR-REIT’s manager had said that financing costs are likely to fall to 3.15% this year following a soon-to-be-announced refinancing, which was confirmed on Jan 29. In its FY2020 results, ESR-REIT’s financing costs had already fallen from 3.94% in FY2019 to 3.54% in FY2020.
As for capital raising, Chui says it will be part of a transaction where ESR-REIT acquires a portfolio, most likely from ESR Cayman. “We believe size does matter, and acquisitions are part of our three year business plans. In the later part of 2021, we will start to move overseas. With ESR Cayman’s platform, our acquisitions will focus on overseas markets were ESR Cayman has established operations,” Chui says.
It will also mean that ESR-REIT’s acquisition pipeline consists mainly of logistics properties, including cold storage facilities owned and operated by ESR Cayman. As at June 30, 2020, ESR Cayman’s assets under management stood at US$26.5 billion spread across six countries. Its Australian AUM was US$2 billion. On Nov 18, ESR Australia Logistics Partnership (EALP) acquired a portfolio of 11 logistics assets for A$302 million, taking EALP’s fund size to A$1 billion.
In October, ESR Australia Developmenet Partnership (EADP) acquired an 18 ha site with the potential to yield 100,000 sq m of gross floor area.
“Our acquisitions will focus on overseas markets where ESR Cayman has established operations. Overseas properties from third parties would be in countries were ESR Cayman has a presence,” Chui adds. He says that 30% to 40% of ESR Cayman’s AUM could be potential acquisition targets for ESR-REIT. The targets could be a mixture of income producing properties and development properties, he adds.
At present, following the failed merger with Sabana Shariah Compliant Industrial REIT, a A$1 billion portfolio from EALP, or a mixture of income producing and development properties with their freehold land tenure from EALP and EADP may look a lot more appealing than Sabana REIT’s properties.
