Warburg Pincus-Backed Logistics Platform ESR Files for $1.24B Hong Kong IPO

ESR Cayman, which manages a portfolio of 152 logistics properties across Asia, has begun marketing to investors a HK$9.8 billion ($1.24 billion) initial public offering in Hong Kong, according to an announcement by the developer and fund manager today.

The Warburg Pincus-backed warehouse builder and investor is making available to investors 560.7 million shares at a price of HK$16.2 to HK$17.4 each, according to a term sheet seen by Mingtiandi.

Should the IPO succeed at the top of the forecast range, it would value the company at $6 billion and make the market debut of the Pan-Asian warehouse concern the biggest real estate IPO on the Hong Kong exchange since Dalian Wanda’s $3.7 billion listing in 2014, according to Mingtiandi estimates.

Listing Expected to Price on 12 June

The offer begins on 6 June, and ends at 12 noon on 12 June, with the final allotment results to be announced on 19 June. Trading in the shares will commence on 20 June under the stock code 1821, with shares to be traded in board lots of 200 shares each.

The listing, which the sponsors intend to price on 12 June and begin trading on 20 June, would rank as Hong Kong’s largest so far this year – acing out the April debut of mainland stock brokerage Shenwan Hongyuan Group, according to information from Bloomberg.

The IPO is an opportunity for investors in the company, primarily Goldman Sachs and Warburg Pincus, to take out some cash from the venture, which was formed by the merger of Shanghai-based e-Shang and Tokyo-centred Redwood Group in 2016. The company now manages 18 private third-party pooled investment vehicles and Singapore-listed ESR REIT. As of the 31 December 2018, ESR had assets under management of $16 billion.

Widely thought of as a warehouse builder, during the first three quarters of 2018, ESR made 57.7 percent of its revenue from management fees derived from its fund management business, while 31.4 percent came from renting out its properties.

The company’s operations in China contributed 39.6 percent of its revenue during the first nine months of last year, with Japan providing another 24.1 percent and Korea just over 17 percent.

Time to Take Some Cash Out

At the time that ESR first filed for the listing in March of this year, a Warburg Pincus subsidiary held 38.35 percent of the company, with Redwood founders Charles de Portes and Stuart Gibson each holding 13.33 percent and another 13.33 percent maintained by other Redwood entities.

Another 11.51 percent interest in the company was held by South Korean conglomerate SK Holdings and mainland ecommerce giant JD.com had 8.23 percent. At that time, Dutch pension fund manager APG held 7.5 percent of ESR, and a trust controlled by ESR co-CEO Jeffrey Shen maintained a 6.5 percent stake.

In all, seven investors are taking advantage of the IPO, which is sponsored by Deutsche Bank and CLSA, as a chance to turn shares into cash, with APG, GE Pension Trust and JD.com’s Jingdong Logistics unit selling smaller amounts in order to generate the volume necessary to create a public float for the company.

Investors to Get Access to Some Sexy Sheds

The IPO, which heads to market the same week that the world’s second-largest warehouse developer sold its US operation to Blackstone for $18.7 billion, is seen as a way for ESR to both pay down debt and to fuel further expansion, according to documents associated with the listing.

For investors, it offers a slice of what is becoming real estate’s sexiest niche market in a market where expansion is happening rapidly.

Just two weeks ago ESR paid S$62.2 million ($45.1 million) to buy control of Singapore-listed Sabana REIT, in a move that furthers its consolidation of the city state’s industrial real estate sector, and, earlier in May, the company closed on JPY 70 billion ($633 million) in financing for its ESR Japan Logistics Fund III.

Led by co-founders and co-CEOs Jeffrey Shen, who founded e-Shang with Sun Dongping and Warburg Pincus, and Stuart Gibson, who set up Redwood Group with Charles De Portes, ESR has already built a portfolio of 5.7 million square metres of facilities across China, Japan, India, Singapore and Korea, and has rapidly been establishing a presence in Australia.

In November last year the company announced a $1 billion joint venture with Allianz Real Estate to develop logistics assets in India.