Hong-Kong listed ESR Group has reported a loss of US$58 million ($75.78 million) in 1HFY2024 ended June 30, reversing from earnings of US$304 million over the same period in 2023.
The decrease in profit, which is primarily non-cash in nature, comes on the back of a loss associated with non-core or near-term divestments, as well as non-cash asset revaluations and a lack of promote fee income in the reporting period.
These factors are reflective of current market conditions, including the prolonged high interest rate environment, muted capital partner transaction activity and continued macroeconomic softness in China.
Additionally, the group also experienced a 31.4% y-o-y drop in total revenue at US$312 million from US$455 million previously, of which the fund management segment revenue comprised over 80%.
In 1HFY2024, the group’s ebitda decreased by 76% y-o-y to US$132 million from US$550 million over the same period in 2023.
The group’s fund management ebitda stood at US$174 million in 1HFY2024, a 47.1% y-o-y decline from US$329 million in 1HFY2023, due to the lack of promote income.
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The company says this is reflective of its fund lifecycles and the overall real estate cycle. Moving forward, the group expects promote fee income to return in subsequent periods with a change in market conditions.
Meanwhile, ESR Group’s total fee-related assets under management (AUM) experienced an 2.7% y-o-y increase to US$80 billion in 1HFY2024 from US$78 billion, previously.
This comes on the back of the group’s focus on new economy opportunities to fuel its next phase of growth, making progress in streamlining and simplifying its business.
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For 1HFY2024, ESR raised US$2.3 billion in new capital — a 155% increase compared to the same period last year. The company says investors remain keen to allocate to the Asia Pacific new economy, with logistics, real estate and data centres remaining as the preferred asset classes.
The company says it continues to make progress on its asset-light strategies and is on track to complete its announced US$1.2 billion worth of asset syndications and non-core divestments (in gross value).
It said that nearly half of its targeted US$760 million divestment of non-core assets will be completed within FY2024.
To note, the company has fully divested its interest in SGX-listed ARA Hospitality Trust and manager, aiming to close the sale of ARA Private Fund business imminently.
ESR Group has also accelerated the founder rollup and full integration of LOGOS from its original January 2025 target, enabling the combined group to capitalise on the benefits of a fully integrated platform, including targeting revenue opportunities and cost synergies.
This combined entity is set to strengthen ESR Group’s new economy leadership position in key Asia Pacific markets with a combined new economy AUM of US$72 billion, and bring together the complementary data centre and infrastructure businesses.
Jeffrey Shen and Stuart Gibson, ESR Group co-founder and co-CEO, says, “The ongoing and focused execution of our stated strategy has positioned the group to navigate the continued uncertainty and set it up well as rates likely come down and transaction activity rebounds.”
In its outlook, the company remains optimistic in view of the positive structural trends across its platforms.
“We are confident that the take-up of our high-quality and newly stabilised assets in Mainland China and Japan will increase as local markets stabilise,” continues Shen and Gibson.
