Hong Kong-listed real estate giant ESR saw a 10% year-on-year jump in its earnings before interest, tax, depreciation, and amortisation (EBITDA) to around $1.1 billion in 2022. The group’s revenue for the year stood at $821 million, which is up 7.1% from the previous year’s $767 million.
While higher fees from the group’s fund management segment drove an increase in revenues, the improvement in EBITDA was a result of “an increase in fee income, share of profits of co-investments and gains on divestment from balance sheet assets to ESR-managed funds in Australia and China”, it said in a statement on Wednesday.
ESR also mentioned that its profit after taxation and minority interests (PATMI) rose 9.3% to $655 million in 2022 from $599 million the previous year. “If not for the substantial weakness of most APAC currencies vs the US dollar in 2022, total EBITDA and PATMI would have surged 20% and 24% year-on-year, respectively,” according to the statement.
The year 2022 represented one of the most challenging market environments since the global financial crisis with sustained inflation, record rate hikes and significant geopolitical and macro challenges, it added.
“Even amidst these headwinds and market volatility, ESR has continued to deliver solid growth,” said Jeffrey Perlman, Chairman of ESR.
ESR Group’s Hong Kong-listed shares closed at 13.44 HK dollars apiece on Wednesday before the results were announced. The scrip has shed 19% so far this year, and nearly 45% in the last one year.
Perlman noted in a webcast late on Wednesday that the group is “very disappointed with the recent share price performance since our strong first half earnings results in August. While we’ve not put out any negative news during this period, there has been an external negative feedback loop that is hopefully starting to turn a corner.”
The group’s assets under management (AUM) stood at a record high of $156 billion in 2022, up 11% year-on-year, following the acquisition of Singapore-based ARA Asset Management and active fundraising activities.
Raising $7.6 billion in capital commitment from global institutional investors across its 28 new or upsized money vehicles and mandates in 2022, ESR’s fund management division recorded a 14.5% surge in EBITDA of $568 million in the 2022 financial year.
In November, ESR partnered with the Export-Import Bank of China for the final closing of its Southeast Asian infrastructure fund which received $1 billion in equity commitments through ARA.
The news came a month after the group, together with its logistics subsidiary LOGOS, hit an initial close of the Pan Asia Core+ Venture, gathering $250 million in equity commitments from German pension fund Nordrheinische Ärzteversorgung and a large US State pension fund.
ESR’s first data centre fund achieved $1 billion in the first close of Data Centre Fund 1 in July last year.
Asset-light strategy
As ESR remains laser-focused on its asset-light strategy, the group has identified up to $750 million of potential non-core divestments that could be redeployed into what it claims to be its “3 core growth pillars”: new economy, alternatives (including infrastructure and renewables) and REITs. Its target asset class includes data centres, logistics, life sciences, and high-tech industrial properties.
“The new economy pillar will in turn fuel the growth of the group’s alternatives segments such as infrastructure and renewables as well as its REIT business,” said a company statement.
As part of the effort, the logistics real estate juggernaut offloaded an 18.16% stake in storage facilities manager China Logistics Property Holdings Co (CNLP) last May. CNLP was delisted from the Hong Kong Stock Exchange in 2022 after a take-private deal from JD Logistics.
While ESR has lowered its co-investment stake to 7.4% to “take on greater development capacity without increasing its existing balance sheet annual commitment”, it is also planning to divest approximately $1 billion of its balance sheet this year.
The strategy has allowed the group to make new investments, such as setting up its data centre platform and upping its equity stake in Vietnam’s largest logistics real estate player BW Industrial in January.