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Warburg-backed ESR mulling over Reit IPO of S Korean assets: sources

Potential share sale could raise at least US$500m; listing is likely to happen as soon as next year

Hong Kong

LOGISTICS real estate developer ESR Cayman is considering an initial public offering of a real estate investment trust (Reit) consisting of South Korean assets, people familiar with the matter said, weeks after it raised US$1.8 billion in a Hong Kong listing.

The Warburg Pincus-backed company recently invited banks to pitch for the potential share sale in South Korea, which could raise at least US$500 million, said the people, who asked not to be identified as the discussions are private.

The listing could happen as soon as next year. The Reit could consist of ESR Cayman's existing assets in South Korea and other properties.

The composition of the Reit and other details of the offering have not been finalised as deliberations are at an early stage.

ESR Cayman raised HK$14.1 billion (S$2.5 billion) less than two months ago after shelving a first attempt in June, citing unfavorable market conditions.

The developer of logistics warehouses has ridden the rapid growth of e-commerce in Asia, which has boosted demand for such properties.

It bought a majority stake in Singapore's Sabana Investment Partners after pledging to invest more than US$1 billion in a logistics park in Yokohama, Japan.

ESR Cayman's portfolio spans China, Japan, South Korea, Australia, Singapore and India, according to its website. It lists six assets in South Korea, including Bucheon Cold Chain Logistics Park, Gachang Logistics Park and Juksan Logistics Park.

In terms of assets under management, South Korea is the third largest for ESR Cayman with about US$3.6 billion as of June 30, according to its IPO prospectus.

Amid ultra-low interest rates, investors have been piling into Reits, which offer decent returns. Property trusts across the region, and particularly in Singapore, have also been active both on the deal-making front and in fundraising.

Hong Kong saw its first Reit IPO in six years with China Merchants Commercial Real Estate Investment Trust's debut this month, while South Korea also featured a successful property trust listing.

Lotte Reit, which raised US$353 million in what was the first Reit IPO in the country in three years, has risen some 25 per cent since its October 2019 debut.

The ESR Korean trust would add to what is shaping up to be a significant pipeline for South Korean IPOs in 2020. Credit card firm Hyundai Card and SK Biopharmaceuticals are both expected to list as soon as next year in sizeable deals. BLOOMBERG