ESR Gets Regulatory Nod for China REIT, Clearing Path for $340M Shanghai IPO

Hong Kong-listed ESR has received the go-ahead from China’s top securities regulator for the warehouse specialist’s inaugural mainland REIT, with the trust’s initial public offering expected to raise nearly RMB 2.44 billion ($340 million).

The China Securities Regulatory Commission approved the application for the registration and listing of ESR China REIT, in which the sponsor will subscribe to a 34 percent stake for the IPO and the remaining 66 percent will be taken up by cornerstone investors, public institutions and retail investors, ESR said Monday in a release.

If the listing on the Shanghai Stock Exchange goes to plan, the REIT’s unitholders will gain access to a vehicle seeded with three ESR-owned logistics facilities located a 45-minute drive west of Shanghai in the Jiangsu provincial city of Kunshan. The exercise will give Warburg Pincus-backed ESR its third REIT in the region, with the company also sponsoring Singapore-listed ESR-Logos REIT and South Korea’s ESR Kendall Square REIT.

“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 ESR co-founder and co-CEO Jeffrey Shen.

Consumer Growth Story

No timetable was disclosed for the listing of ESR C-REIT, which has secured AVIC Fund as the licensed manager and China Merchants Securities as financial advisor. The trust’s annualised cash distribution rate is estimated at 4.5 percent in 2024 and 4.6 percent in 2025.

Consisting of three buildings developed within a single project, Jiangsu Friend Phases I-III comprise more than 426,000 square metres (4.6 million square feet) of total floor area. Of the trio, Phase I measures 135,000 square metres, Phase II provides 85,000 square metres and Phase III is the largest at 206,000 square metres.

The portfolio boasts a five-year average occupancy rate of over 90 percent and multinational tenants like luggage maker Samsonite and Havi, the supply chain manager for KFC and Pizza Hut in China. The three properties represent some of the developer’s best assets in China, said ESR co-founder and co-CEO Stuart Gibson.

“We are confident this portfolio will set the foundation for us to continue to grow the C-REIT with additional assets contributed from our portfolio and bring more opportunities for us to collaborate with onshore financial institutions and investors in China, where strong growth in consumerism underpins a high tenant occupancy, translating into stable and sustainable returns for our investors,” Gibson said.

Pipeline at the Ready

As sponsor and project manager, ESR will provide the REIT with a future pipeline of projects for acquisition from a China portfolio of more than 170 assets under management with a total AUM in excess of $30.7 billion and a combined gross floor area spanning 14.9 million square metres.

Nearly 70 percent of ESR’s stabilised China properties are in key economic hubs of the Yangtze River Delta and Greater Bay Area, where demand is being driven by strong activity in renewable energy industries and cross-border e-commerce, according to the company.

ESR C-REIT is a significant milestone opening a new growth engine for the company in Asia’s biggest economy, said Chang Rui Hua, managing director for business management and investment at ESR Hong Kong Ltd.

“We are also honoured to work with a new partner AVIC Fund who shares our vision of establishing viable capital market fundraising vehicles to complete the entire investment cycle,” said Chang, who is responsible for ESR’s C-REIT initiative.

Beijing-based AVIC Fund manages two of the existing 36 C-REITs, namely AVIC Shougang Green Energy REIT and AVIC Jingneng Photovoltaic REIT.