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<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nKey Highlights: <\/i><\/b><\/p>\n HONG KONG<\/span>, March 21, 2024<\/span> \/PRNewswire\/ — ESR Group Limited ("ESR" or the "Company", together with its subsidiaries as the "Group"; SEHK Stock Code: 1821), APAC’s largest real asset manager powered by the New Economy, today announced its full year results ended 31 December 2023<\/span> ("FY2023"). <\/p>\n ESR’s integrated fund management and development platform in APAC delivered increased fund management earnings on higher fee-related assets under management2,3<\/sup> ("AUM") and strong operating fundamentals. This improvement came despite a challenging macroeconomic environment that included a material change in the interest rate environment and one of the weakest fundraising environments on record.<\/p>\n Fee-related AUM2,3<\/sup> as at end December 2023<\/span> grew 6.3% y-o-y to US$81.1 billion<\/span> whilst Total AUM3,8 <\/sup>increased 7.3% to US$156.1 billion<\/span>.<\/p>\n The Group achieved record Fund Management EBITDA1<\/sup> of US$579 million<\/span> for FY2023, a 2% growth y-o-y. Excluding promote fees, Fund Management EBITDA1<\/sup> increased by 8.9% y-o-y. In line with the Group’s asset-light transformation, Fund Management EBITDA1<\/sup> now comprises nearly 60% of ESR’s total segmental EBITDA, up from 21% at IPO in 2019. Fund Management Fee Income has grown at a three-year CAGR of 57% since 2020. The Group’s business has also become significantly more diversified across APAC in the last several years with North Asia<\/span> (Japan<\/span> and South Korea<\/span>), India<\/span> \/ Southeast Asia<\/span> and Australia<\/span> & New Zealand<\/span> now representing the three largest regions, contributing 36%, 22% and 21% of fee income, respectively. <\/p>\n The Group’s revenue was up by 6% from US$821 million<\/span> in FY2022 to US$871 million<\/span> in FY2023. EBITDA9<\/sup> and PATMI10<\/sup> were lower y-o-y as a result of the impact of lower fair value gains across key markets as well as higher interest costs as a result of the material change in the interest rate environment.<\/p>\n FY 2023<\/b><\/span><\/p>\n<\/td>\n FY 2022<\/b><\/span><\/p>\n<\/td>\n Variance (%)<\/b><\/span><\/p>\n<\/td>\n<\/tr>\n AUM<\/b>3,8<\/sup> 156.1<\/span><\/p>\n<\/td>\n 145.5<\/span><\/p>\n<\/td>\n 7.3 %<\/span><\/p>\n<\/td>\n<\/tr>\n Fee-Related AUM2,3<\/sup><\/b><\/span><\/p>\n (US$ billion)<\/b><\/span><\/p>\n<\/td>\n 81.1<\/span><\/p>\n<\/td>\n 76.3<\/span><\/p>\n<\/td>\n 6.3 %<\/span><\/p>\n<\/td>\n<\/tr>\n Revenue 871<\/span><\/p>\n<\/td>\n 821<\/span><\/p>\n<\/td>\n 6.1 %<\/span><\/p>\n<\/td>\n<\/tr>\n Fund Management EBITDA1<\/sup><\/b><\/span><\/p>\n \/ ex-Promote Fees (US$ million)<\/b><\/span><\/p>\n<\/td>\n 579 \/ 397<\/span><\/p>\n<\/td>\n 568 \/ 365<\/span><\/p>\n<\/td>\n 1.9% \/ 8.9%<\/span><\/p>\n<\/td>\n<\/tr>\n EBITDA9<\/sup><\/b> 885<\/span><\/p>\n<\/td>\n 1,152<\/span><\/p>\n<\/td>\n (23.1 %)<\/span><\/p>\n<\/td>\n<\/tr>\n PATMI10 400<\/span><\/p>\n<\/td>\n 655<\/span><\/p>\n<\/td>\n (38.8 %)<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n Commenting on the results, Jeffrey Shen<\/span> and Stuart Gibson<\/span>, ESR Group Co-founders and Co-CEOs, said: "We are pleased with our execution in 2023 despite the challenging headwinds of a rising rate environment and increasing geopolitical tensions. With focused execution, we have delivered on our 3 core priorities over the past 12 months, including (i) reinforcing our market leadership in New Economy with over US$6 billion<\/span> in development starts and over US$4 billion<\/span> of completions, (ii) further simplifying and streamlining the business with the recent sale of the ARA Private Funds business and (iii) growing our AUM and Fund Management EBITDA to now reach nearly 60% of our Segmental EBITDA. We continue to stand out on the fundraising front, with our best-in-class products, including establishing our largest-ever RMB Income Fund in China<\/span> in 2023 and we recently debuted South Korea’s<\/span> first US$2 billion<\/span> flagship open-ended logistics core fund. As a fully integrated developer and fund management platform, we are well positioned to drive recurring fee growth by providing a full suite of solutions and product platforms across the value chain for a range of capital partners. While transaction activity has been muted over the past 18 months, we anticipate it to pick up over course of 2024.<\/p>\n The Co-CEOs further commented: "On the operating side, New Economy demand has supported our record leasing activity, allowing us to achieve close to full occupancy in several key markets with double digit rent renewals being achieved across APAC (ex-China<\/span>). Furthermore, we have a large and high value development workbook, where the contribution from our data centres is accelerating on the back of the rise in Generative AI.<\/p>\n Additionally, we continue to be anchored on our asset-light approach, which includes reducing our balance sheet exposure in China<\/span>. We are targeting US$1.5<\/span>–US$2 billion<\/span> of balance sheet divestments over the next 12 months. Further, we are also progressing well with the continued integration of the LOGOS business. The integration will further deliver additional synergies and enhance shareholder value creation."<\/p>\n Focused on delivering sustainable value to shareholders<\/b><\/p>\n In line with ESR’s goal of a sustainable dividend policy established in 1H2022, the Board of ESR recommended the declaration of a final dividend of HK$12.5 cents<\/span> per share (approximately 1.6 US cents per share) (which implies a 2.9% yield7<\/sup>) for the financial year ended 31 December 2023<\/span>, amounting to approximately US$67 million<\/span> which will be paid to Shareholders on 28 June 2024<\/span>.<\/p>\n Healthy capital raising amid a challenging environment <\/b><\/p>\n Despite a second consecutive year of muted fundraising for the sector, the Group worked closely with capital partners to achieve a capital raise of US$7.5 billion<\/span>. Key capital raising commitments and initiatives in FY2023 included:<\/p>\n In the first quarter of 2024, the Group successfully raised approximately US$1 billion<\/span>. This includes the Group’s first perpetual, open-ended logistics core fund in South Korea<\/span>, holding an initial portfolio of seven high quality class A logistics warehouses worth approximately US$2 billion<\/span> reinforcing a strong track record with over a 25% net IRR and 3.5x equity multiple achieved for the development fund 1 investors.<\/p>\n As at 31 December 2023<\/span>, the Group has substantial dry powder of US$23.9 billion<\/span> (of which over US$13.5 billion<\/span> is New Economy focused) to deploy on behalf of investors at a time when asset pricing is becoming more favourable and development returns are strong.<\/p>\n Balance Sheet Optimisation <\/b><\/p>\n ESR has progressed its asset light strategy through further syndication of balance sheet assets, with Greater China<\/span> a key focus of ongoing sell-down and syndication efforts. The Group is on track to complete over US$500 million<\/span> worth of announced transactions and are targeting up to a further US$1.5<\/span>–US$2 billion<\/span> over the next 12 months. These planned sell-downs to ESR managed vehicles along with the announced non-core divestments is expected to reduce the Group’s gearing over the medium term towards the low end of the Group’s gearing target of 20-30%. The interest savings made on lower gearing would add to potential distributions or provide capital for future share buybacks.<\/p>\n Laser-focused on business transformation and simplification<\/b><\/p>\n With its focus on New Economy, the Group identified up to US$750 million<\/span> of non-core divestments in 2023. In March 2024<\/span>, the Group announced the sale of the ARA Private Funds business which represents a significant milestone in this process and other non-core divestments are advancing.<\/p>\n The Group is also working towards the final stages of the LOGOS integration over the balance of the year. The successful integration will deliver a combined Australia<\/span> \/ New Zealand<\/span> business that will represent the largest New Economy developer and the second largest New Economy manager (by AUM and deployment of uncalled capital). It will also create further scale in data centres with complementary funds and strategies. To date, the overall ARA business integration has achieved US$35 million<\/span> of cost synergies. Further revenue and cost synergies are expected in FY2024 and FY2025 from a fully integrated APAC New Economy platform.<\/p>\n Resilient operating performance and continued diversification <\/b><\/p>\n Operating fundamentals for the Group’s New Economy assets remain strong and the Group leased a record of 5.3 million sqm4 <\/sup>of space in 2023. As at 31 December 2023<\/span>, the portfolio occupancy4,5<\/sup> rate for the Group’s New Economy assets remained above 91% (98% excluding Mainland China). The Group achieved rental reversions of approximately 8.2% (14.3% excluding Mainland China)4,6<\/sup>. Leases in Australia<\/span> and South Korea<\/span> accounted for the highest rental growth rates, achieving approximately 19.5% in the year. This significantly mitigated the cap rate expansion for assets in Australia<\/span> and South Korea<\/span>, save for those with longer Weighted Average Lease Expiry ("WALE"). The Group has been very selective in China<\/span>, with nearly 70% of the stabilised properties located in major economic hubs in the Yangtze River Delta and Greater Bay Area where demand is driven by the strong activity in renewable energy industries and cross-border e-commerce respectively. <\/p>\n The Group maintains a well-staggered lease expiry profile with WALE of 4.6 years4<\/sup> (by income). <\/p>\n Large New Economy development workbook to fuel future earnings growth <\/b><\/p>\n As at 31 December 2023<\/span>, ESR had over 24.5 million sqm of GFA in its development pipeline across its portfolio including a sizeable landbank of about 7 million sqm for future development. Development activity was solid in light of the difficult environment with US$6.3 billion<\/span> and US$4.2 billion<\/span> of starts and completions, respectively, in FY2023. In total, only 2% of the development starts were in Mainland China where ESR materially slowed the pace of new development projects in FY2023. 61% of development completions were mainly from Australia<\/span>, Japan, South Korea, followed by 30% from Mainland China. <\/p>\n In terms of work-in-progress, it is similarly diverse, with 52% comprising projects in Japan<\/span>, South Korea<\/span> and Australia<\/span> \/ New Zealand<\/span>, 26% in India<\/span> \/ Southeast Asia<\/span> and Hong Kong<\/span>, and data centres make up a further 13% of the total. About 90% of the Group’s workbook is planned for completion between FY2024 and FY2027. As the Group develops more large-scale, multi-story or multi-phase projects, including data centre projects, it has increasing visibility towards future fee income. <\/p>\n ESR’s strong development pipeline includes numerous landmark projects which will create new benchmarks in the market and drive future fees and development profit:<\/p>\n Proactive capital management <\/b><\/p>\n Proactive capital management strategies have ensured ample liquidity with an aggregated US$2.5 billion<\/span> of cash and loan drawdown availability in place. Furthermore, during the year, the Group successfully diversified its funding sources through the US$1.2 billion<\/span> multi-currency revolving credit facility secured with various foreign banks. While gearing closed year-end at 30.7% at 31 December 2023<\/span>, it is expected to reduce once the previously announced transactions in 2023 are completed, with proceeds applied towards debt repayment. The Group is expected to reduce its gearing over the medium term towards the low end of its gearing target of 20-30%.<\/p>\n The Group has expanded and diversified its funding and capital structure during the year:<\/p>\n\n
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