ESR on Tuesday announced plans for a China REIT seeded with three of the group’s logistics projects west of Shanghai, as the industrial specialist looks to securitise mainland assets after authorities cleared the way for onshore listed trusts last year.
The Hong Kong-based developer is considering listing the trio of projects in the city of Kunshan in eastern Jiangsu province through a publicly offered infrastructure securities investment fund on the Shanghai Stock Exchange, ESR said in a filing with the Hong Kong stock exchange.
ESR has made an application for the spin-off to the HKEX and intends to apply for approvals from the National Development and Reform Commission and the China Securities Regulatory Commission, the two agencies that launched the REIT pilot programme in early 2021.
“As at the date of this announcement, the terms and the timetable of the proposed transaction have not yet been finalised and may change depending on the approval status of the relevant regulatory authorities and market conditions,” ESR co-founder and co-CEO Jeffrey Shen said in the filing.
The proposed REIT’s three seed assets span more than 427,000 square metres (4.6 million square feet) of gross floor area in Kunshan’s Huaqiao town, roughly midway between Shanghai and Suzhou, as part of ESR’s Kunshan Huaqiao Park complex.
ESR completed the wholly owned projects — known as Jiangsu Friend I, II and III — in 2011, 2013 and 2018 respectively. The 135,081 square metre Jiangsu Friend I is on a leasehold expiring in 2054, while the 85,674 square metre Jiangsu Friend II and the 206,418 square metre Jiangsu Friend III are on leases running until 2056.
Chang Rui Hua, ESR’s managing director of capital markets and investor relations, told Mingtiandi on Wednesday that the group is working with AVIC Trust as the REIT manager partner on the new vehicle.
“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,” Chang said. “By listing a REIT, we can consider which platform to sell our assets into, depending on the valuation we get. In addition, we plan to list in Shanghai as it is tax-effective to list our local assets in the local stock exchange.”
A C-REIT provides a fresh exit strategy for private funds managed by Hong Kong-listed ESR, which bills itself as the largest sponsor and manager of real estate investment trusts in Asia Pacific. The group and its associates oversaw 14 REITs totalling $45 billion in assets under management as of the end of 2021.
ESR-Logos REIT, one of the 10 largest REITs on the SGX, holds 83 properties across Singapore and Australia valued at S$5.5 billion ($4 billion), while ESR Kendall Square REIT, South Korea’s first publicly listed logistics trust, comprises 18 assets valued at KRW 2.4 trillion ($1.9 billion).
Competitors Jump In
The race is slowly heating up in China’s nascent REIT sector, which so far has excluded bubble-prone commercial properties in favour of infrastructure and industrial assets.
In June 2021, ESR arch-rival GLP became the first international company to list a REIT in China when it teamed up with state-backed investment bank CICC to launch GLP C-REIT. The logistics giant raised RMB 5.85 billion through the listing of GLP C-REIT, which owns a portfolio of seven logistics assets with over 700,000 square metres of gross floor area.
In September of this year, mainland authorities gave the nod to D&J New Economy Industrial Park REIT, a RMB 1.38 billion ($200 million) trust sponsored by Warburg Pincus-backed DNE Group with four industrial parks spanning 284,000 square metres. DNE chairman Sun Dongping co-founded ESR predecessor e-Shang with Jeffrey Shen.
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