ESR Korean REIT Closes on $400M in Fresh Equity as Portfolio Grows

Having grown its portfolio by 50 percent since its $650 million IPO last December, ESR Kendall Square REIT, South Korea’s first publicly listed logistics trust, has sold 100 percent of a $400 million follow-on equity offering.

The fresh capital raise marks the largest-ever follow-on offering for a KRX-listed REIT in terms of offering size, Hong Kong-based logistics giant ESR said Tuesday in a release. The new shares will be listed on the Korea Stock Exchange on 28 December.

After going public last year with a 12-asset portfolio, the REIT managed by ESR Korea unit Kendall Square has expanded its holdings to 18 logistics assets with a total asset value of $2.2 billion, including two Seoul-area properties acquired in mid-2021 and six assets to be added immediately after the new shares are listed.

“With the completion of the follow-on offering, ESR Kendall Square REIT is poised to become Korea’s biggest listed REIT in terms of market capitalisation and asset size, further cementing our leadership position as the biggest logistics asset operator in the country and enjoying a clear lead over the next largest player,” said Sanghwoi Bae, chief executive of the trust’s manager.

Rookie of the Year

Following the latest equity raising, ESR Kendall Square REIT is expected to show 70 percent year-on-year growth or an $880 million increase in asset size within its first 12 months since listing, ESR said. That feat would make it the fastest-growing and largest REIT in Korea, with a post-offering market cap of about $1.2 billion.

Jeffrey Shen and Stuart Gibson, ESR’s co-founders and co-CEOs, called the trust a “great example” of the continued financialisation of real estate in Asia Pacific and the emergence of a large and thriving REIT sector in the region.

“We are very pleased with the performance and growth of ESR Kendall Square REIT to date,” they said. “Korea is a core strategic market of ESR where we continue to see great potential and prospects driven by strong e-commerce and a limited supply of prime institutional-grade logistics assets.”

ESR Kendall Square REIT’s institutional investors include global names like ESR, BlackRock and the Canada Pension Plan Investment Board. The trust’s recent acquisitions include the 43,045 square metre (463,333 square foot) Yongin BRIC facility southeast of Seoul for $94.2 million and the 94,875 square metre Anseong Logistics Park south of the capital for $145 million, both announced in June.

Listed-Trust Titan

With the planned $5.2 billion acquisition of Singapore-based ARA Asset Management, the enlarged ESR Group is set to become the biggest sponsor of REITs in APAC, Shen and Gibson said.

“We believe we are uniquely positioned to continue to capture the outsized growth of one of the largest secular trends in the region,” the co-CEOs declared.

In November, ESR shareholders approved the acquisition deal that is expected to create the largest real asset manager in APAC and the third-largest listed real estate investment manager worldwide, with combined assets under management totalling $131 billion.

More than half of the enlarged group’s AUM will come from perpetual and core capital vehicles, including 14 listed REITs, according to ESR.

In what it called a value-enhancing step for the enlarged group, ESR in October proposed the merger of ESR-REIT and ARA Logos Logistics Trust to form Singapore-listed ESR-Logos REIT with total assets of $4 billion. By market cap, ESR-Logos REIT’s S$2.5 billion free float would rank eighth on the Singapore Exchange, just behind OUE Commercial Trust and ahead of CapitaLand China Trust.