ESR has taken another step toward becoming the second international company to list a real estate investment trust on a Chinese stock exchange, with the industrial giant announcing on Friday that it has filed an application with mainland authorities for a Shanghai-listed logistics REIT.
In a filing to the Hong Kong bourse on Friday, Warburg Pincus-backed ESR said that on that same day it had submitted applications to China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange to register and list a REIT holding a set of three logistics projects in the city of Kunshan in eastern China’s Jiangsu province.
A filing on the Shanghai exchange on Friday showed the trust listed as AVIC ESR Warehouse Logistics Closed Infrastructure Securities Investment Fund, with AVIC Securities managing the REIT locally. Should it prove successful, the listing will provide ESR, which according to its website has $30.8 billion of assets under management in Greater China, with all but a fraction of those holdings on the mainland, with a fresh avenue for monetising assets.
“Our strategy is to create both the private and public platforms for our assets when they mature, and China will be the second platform where we provide both options to our investors,” managing director for business management and investment at ESRT told Mingtiandi when the company first proposed its mainland listed trust a year ago. “By listing a REIT, we can consider which platform to sell our assets into, depending on the valuation we get.”
While the materials for the listing have yet to appear on the Shanghai exchange, ESR confirmed that the portfolio consists of phases one through three of Jiangsu Friend, a fully leased complex in Kunshan’s Huaqiao district. Kunshan is a popular logistics hub just west of Shanghai on the road to Suzhou.
Together the three properties span 426,000 square metres (4.6 million square feet) and were completed from 2011 through 2018. Of the trio, Jiangsu Friend Phase I measures 135,000 square metres, Jiangsu Friend Phase II provides 85,000 square metres and Jiangsu Friend Phase III is the largest at 206,000 square metres.
All three assets are held by a single, wholly owned subsidiary of ESR, which should the REIT listing be successful, would be selling the warehouses to the trust. In the stock exchange filing, ESR said it expects to subscribe for 34 percent of the total units in the REIT at the time of the proposed listing. With the application now filed, ESR will now need to wait for approval from mainland regulators.
Other details of the proposed listing, including valuation information and a timetable, have not yet been made public. AVIC Securities is described in the local exchange filing as special project manager for the listing.
Under China’s pilot REIT programme, the trust is structured as a “publicly offered infrastructure securities investment fund,” with the government now working to expand the market as China’s residential and commercial developers struggle with liquidity challenges.
The listing would give ESR its third REIT in the region, with the company also sponsoring ESR-Logos REIT, one of the 10 largest REITs on the Singapore exchange and ESR Kendall Square REIT, which became South Korea’s first publicly listed logistics trust with its 2021 IPO.
REIT Market Expands
After declaring its plan for the Shanghai-listed REIT a year ago, ESR had received approval from the Hong Kong exchange in March as a required preliminary to the Hong Kong listing.
Since the debut of China’s first REITs in 2021, the country has been moving to expand the sector as way to deepen its property markets with the government maintaining its ambivalence toward the world of finance by referring to the listed trusts as infrastructure investment vehicles.
“We are excited that our proposed transaction is in line with the Chinese government’s support of the securitization of infrastructure projects and we are confident that the proposed transaction will reinforce our market leadership and open a new and exciting growth engine for the Group in China,” ESR co-founders and co-CEOs Jeffrey Shen and Stuart Gibson said at the time that the company received approval for the REIT from the HKEX.
ESR competitor GLP had been the first to list a logistics REIT in China with GLP C-REIT having commenced trading in June 2021 in the country’s first batch of listed property trusts.
Warburg Pincus-backed DNE Group achieved its own industrial REIT listing late last year after winning approval for D&J New Economy Industrial Park REIT, a RMB 1.38 billion ($200 million) trust, in September of 2022.
Last month China formally moved to broaden its REIT market to include commercial properties, with the CSRC on 24 November granting approval for a trio of “consumer-related infrastructure” REITs seeded with shopping malls owned by mainland developers China Resources Land, China Jinmao, and China Vanke.
In addition to ESR’s latest listing milestone, on Friday, separate applications for Shanghai logistics REIT listings backed by mainland investment banks Huatai Securities and CICC both received feedback from the bourse requesting additional documentation.