ESR H1 Earnings Up 15% to Hit $665M After Integration of ARA

Hong Kong-listed ESR achieved what it termed a “stellar performance” for the first half of 2022, with the real asset manager’s earnings before interest, tax, depreciation and amortisation rising 15.3 percent year-on-year to reach $665 million.

The pro forma results account for this year’s $5.2 billion acquisition of ARA Asset Management by treating the deal as if it had been completed in the first half of 2021, ESR said Thursday in a release. Adjusted revenue climbed 9.4 percent year-on-year to $432 million during the first half.

The group’s assets under management at the end of the six-month period stood at $149 billion, up 14 percent year-on-year, and included the $1 billion first closing of ESR’s inaugural data centre fund, as announced in July.

“Despite numerous headwinds in the first half of the year including rising interest rates, sustained inflation, increasing geopolitical tensions and zero-COVID policies, the ESR Group continues to be able navigate this complex environment effectively to deliver for our shareholders,” said chairman Jeffrey Perlman.

Together as One

The acquisition of ARA has further expanded ESR’s fee base, while the addition of ARA unit Logos has given a boost to the group’s new economy business.

“In fact, our development starts and completions were up over 100 and 50 percent year-over-year, respectively, on the back of record-low vacancies, record leasing for our existing portfolio and customers who are pushing us for more space,” Perlman said. “This has contributed to further growth in our development workbook which represents the largest in APAC at $12 billion and one of the largest globally.”

The group’s fund management EBITDA rose 9.2 percent year-on-year in the first half to $288 million, driven by high recurring fee revenue and record development.

The result was even more impressive given the very robust year-earlier period for comparison, ESR said.

Fundraising on a Roll

ESR raised $3.9 billion in the January-June period through 15 new or upsized funds and mandates, including a freshly launched pan-Asian discretionary development vehicle and the aforementioned Data Centre Fund 1, which comprises a development pipeline of eight seed projects with more than 260 megawatts of capacity.

In addition to the $1 billion already committed, ESR said it would raise a separate discretionary capital sleeve to co-invest in the data centre fund, boosting the vehicle to its hard cap of $1.5 billion. With the upsize option, and after adding leverage, the group expects Data Centre Fund 1 to have a total investment capacity of as much as $7.5 billion over time.

In July, ESR acquired only its second project ever in Hong Kong, having shouldered aside two competing bids to secure a logistics site at the city’s Kwai Chung container port for HK$5.26 billion ($668.7 million).

Earlier this month, ESR announced that Hong Kong developer Chinachem would take a 49 percent stake in the HK$11 billion Kwai Chung project, which will consist of 1.48 million square feet (138,000 square metres) of warehouse space on the site at Mei Ching Road and Container Port Road South.