ESR Launches $354M IPO of China Logistics REIT

Five months after receiving the go-ahead from China’s top securities regulator for its inaugural mainland-listed trust, ESR Group has launched the initial public offering for a Shanghai REIT listing that could raise as much as RMB 2.6 billion ($354 million).

The China Securities Regulatory Commission (CSRC) has given ESR China REIT (ESR C-REIT) the green light to issue 800 million units in the offering, with the manager of the trust having set an indicative price range of RMB 2.628 to RMB 3.2 per unit. That range represents an offering size of RMB 2.1 billion to RMB 2.6 billion, according to ESR’s filings with the Shanghai Stock Exchange on Friday, with final pricing for the offering to be determined on or around 6 December.

Despite having received CSRC approval for the application and registration of the listing in June, Warburg Pincus-backed ESR opted not to launch the offering at that time, citing market conditions.

“In view of market conditions at that time, the REIT Offering was not commenced after the Previous Announcement was made,” ESR said in a separate filing to the Hong Kong Stock Exchange on Friday. “The Board is pleased to announce that on 29 November 2024, the REIT Offering has been launched on the Shanghai Stock Exchange.”

Early January Listing

Also known as AVIC ESR Warehouse and Logistics Infrastructure REIT, ESR C-REIT is seeded with three ESR-owned logistics facilities collectively dubbed Jiangsu Friend, which are located a 45-minute drive west of Shanghai in the Jiangsu provincial city of Kunshan. Beijing-based AVIC Fund Management is the trust’s manager, while China Merchants Securities is serving as financial advisor.

As sponsor, ESR will subscribe to a 39.38 percent stake in the IPO, while other cornerstone investors, which ESR in its June announcement defined as leading financial institutions and securities firms, have signed up for a combined 34.64 percent, according to the filings.

Another 18.19 percent of the offering has been allocated to public institutions, with the remaining 7.8 percent set aside for retail investors. Cornerstone investors, ESR disclosed in its announcement of the CSRC approval in June.

The IPO will be open for public investors on or around 13 December and completion of the offering is targeted for 19 December, with the listing taking place around early January, according to Chang Rui Hua, managing director of business management and investment for ESR Hong Kong, who is also responsible for the ESR C-REIT IPO.

The trust’s annualised cash distribution rate is estimated at 4.5 percent in 2024 and 4.6 percent in 2025, ESR said in June.

ESR is kicking off the C-REIT IPO amid a proposed privatisation of the HKEX-listed industrial developer and fund manager by a consortium of investors including Starwood Capital, Sixth Street Partners, SSW Partners, the Qatar Investment Authority, and Warburg Pincus, with Reuters reporting on Friday that a deal could be finalised in the coming weeks, citing sources with knowledge of the matter.

Trading in ESR’s shares were halted on Friday, pending the release of an announcement in relation to inside information about takeovers and mergers, the company said in a separate HKEX filing.

90% Occupancy

Developed as a three-building logistics park, Jiangsu Friend Phases I-III comprise more than 426,000 square metres (4.6 million square feet) of total floor area.

The portfolio boasts a five-year average occupancy rate of over 90 percent and multinational tenants in sectors such as logistics, e-commerce, and fast-moving consumer goods, including 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, ESR co-founder and co-CEO Stuart Gibson said in June.

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 valued at over $30.7 billion and spanning over 14.9 million square metres of gross floor area.

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

The listing will give ESR its third REIT in Asia, 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,” ESR co-founder and co-CEO Jeffrey Shen said in June.

C-REIT Expansion

ESR China REIT is preparing to list nearly five years after China introduced its pilot REIT programme, which has since seen at least 36 trusts listed on mainland exchanges.

Initially only permitted to hold infrastructure assets and industrial and logistics properties, the programme’s scope was later expanded to include affordable rental housing projects, new economy infrastructure including data centres, shopping malls, and most recently, offices, hotels, and senior living facilities.

Earlier this year, qualified C-REITs and Hong Kong-listed REITs were approved by the CSRC for inclusion in the Stock Connect scheme linking the Shanghai, Shenzhen and Hong Kong exchanges, enabling cross-border trading of trusts in both jurisdictions.