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ESR: strong start for second-biggest Asian IPO this year

Pictured: an ESR Cayman logistics property; Photo supplied: ESR Cayman

Logistics real estate developer ESR Cayman (HK: 01821) roared into public life on Friday when it floated on the Hong Kong Stock Exchange. The stock reached a high of HK$18.10, up from the open price of HK$17.60. One Hong Kong dollar was worth 13 U.S. cents at the time of writing.

By market close, the share price was HK$17.72, giving ESR a HK$53.80 billion (US$6.86 billion) market capitalization. Based on the final pre-IPO offer price of HK$16.80 per share, the company raised about HK$4.44 billion ($565.5 million) after deductions of fees and expenses.

The ESR float is thought to be the second-biggest Asian IPO this year, after the Hong Kong listing of Budweiser Brewing Company Apac Ltd. (HKEX: 1876). 

Shares issues and use of funds

The final pre-IPO offer price was HK$16.80 per share, and the company offered 653.68 million shares to the international markets. However, the over-allocation option was exercised, and a further 98.05 million shares were also offered at HK$16.80.


About 71.5% of the funds raised will be used to pay down debt and redeem previously issued convertible preference shares. A further 28.6%, about HK$1.27 billion (US$161.6 million), will be used to develop logistics properties and to make co-investments in funds that ESR manages.

About ESR

ESR says it is the largest Asia Pacific-focused logistics real estate developer and investor when measured by gross floor area and by the value of assets owned and managed.

As of June 30, 2019, ESR managed 30 third-party pooled investment vehicles and two real estate investment trusts. The gross floor area of projects owned and under development by ESR was over 15.3 million square meters (164.69 million square feet). Assets under management as of June 30, 2019, were valued at about US$20.2 billion.

ESR revenues stood at US$155.8 million for the six months to the end of June 2019. Management fee income, “a key component of revenue,” stood at US$61.8 million. Net profit stood at US$84.1 million in the same time period. The majority of the company’s profit was derived from fair value gains on investment properties along with its share of profits and losses from joint ventures.


ESR leases logistics facilities to “a broad range of large and mid-sized multinational and domestic tenants,” the company says. Customers include e-commerce companies, third-party logistics providers, brick-and-mortar retailers, manufacturers, cold-chain logistics providers and other such entities.

Asia-Pacific logistics real estate market

The company focuses on the Asia-Pacific region, which comprises over 3.6 billion people and over US$28.6 trillion of gross domestic product (about 33% of global gross domestic product in 2018). It targets locations near logistics and transport hubs, seaports, airports and industrial zones in mainland China, Japan, South Korea, Singapore, Australia and India, “which are the markets we believe will drive future growth,” the company said.

In relation to the broader market, ESR quotes a Transport Intelligence report that the Asia-Pacific region’s e-commerce market will reach approximately US$250 billion by 2023. Driving that growth is the rise in the number of middle-class households with an associated rise in consumption and disposable income.

“Economic growth, consumption and retail spending, and ecommerce all underpin growth in the logistics sector and thus demand for logistics real estate,” the company said in a statement.

Financiers and advisers

Joint sponsors: Deutsche Bank Group and CLS

Joint global coordinators and joint bookrunners: Morgan Stanley, Deutsche Bank Group, Citi, Credit Suisse, and Goldman Sachs

Joint bookrunners: CCB International, CICC, CLSA, Credit Agricole, DBS, Mirae Asset Securities, and UOB Kay Hian

Corporate finance: Deutsche Securities Asia, CLSA Capital Markets


Accounting: Ernst & Young, KPMG, Bentleys Brisbane Partnership

Legal advice: Global Law Office (Chinese law); Walkers Hong Kong (Cayman Islands)

Property valuation:  Beijing Colliers International; CBRE; Jones Lang LaSalle