China approves ESR Group's Reit IPO, letting real estate investment trust raise US$356 mn

Hong Kong-listed ESR Group, an Asia-focused real estate services and investment company, said its application to list a real estate investment trust (Reit) has been approved by China's securities regulator.

The ESR China REIT (ESR C-Reit) plans to raise around 2.4 billion yuan (US$355.8 million) via an initial public offering (IPO). ESR will subscribe to 34 per cent of the IPO, while the remaining 66 per cent will be offered to cornerstone investors, public institutions, and retail investors, the group said in a statement on Monday, without specifying the exchange for the IPO.

A Reit is a publicly-traded company that owns, operates, or finances income-generating properties, allowing investors to pool their capital and earn dividends without directly buying, managing, or financing the real estate.

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The ESR C-Reit currently includes three logistics facilities in Kunshan, a major logistics hub in China's eastern Jiangsu province, located near Shanghai. The three assets have a total gross floor area (GFA) of over 426,000 sq m and have had an average occupancy rate of over 90 per cent in the past five years.

"ESR will be able to provide ESR C-REIT with a future pipeline of assets for acquisition from its quality portfolio of assets under management [AUM] and development pipeline," it said. It added that nearly 70 per cent of ESR's stabilised properties in China are located in major economic hubs in the Yangtze River Delta and Greater Bay Area where demand is driven by strong activity in renewable energy industries and cross-border e-commerce. The group manages over 170 assets, with a total AUM of more than US$30.7 billion and gross floor area of about 14.9 million sq mts.

The vehicle will start to distribute cash to investors at an annualised rate of 4.5 per cent for 2024, and 4.62 per cent for 2025, it said.

In April, CSRC unveiled five new measures to help further integrate the capital markets in mainland China and Hong Kong. One of the measures was the inclusion of Reits in the China-Hong Kong Stock Connect mechanism.

"The ESR C-Reit adds to our stable of perpetual capital vehicles across the APAC region and completes the full range of investment products on offer to domestic institutional and retail investors in China, enabling access to the compelling fundamentals of the logistics real estate sector in China, which continues to benefit from positive tailwinds, in a listed, liquid format." said Jeffrey Shen, ESR Group's co-founder and co-chief executive officer, said in the statement.

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