Japan BCCJ member set to list company he founded on Hong Kong Stock exchange
June 17, 2019
ESR Cayman, Asia-Pacific's largest warehouse landlord, set to raise up to US$1.2 billion in Hong Kong's biggest IPO so far this year
ESR Cayman, the largest logistics landlord in Asia-Pacific backed by private equity firm Warburg Pincus, has shrugged off the impact of the US-China trade war on the capital markets by launching Hong Kong's biggest IPO so far this year.
The company is seeking to raise up to HK$9.76 billion (US$1.24 billion) by issuing 560.7 million shares at an indicative offer price range of HK$16.2 to HK$17.4 per share. It has reserved the option of issuing an additional 15 per cent or 84.1 million shares, taking the potential fundraising to HK$11.2 billion.
Jeffrey Perlman, chairman of ESR, said at a press conference to announce the details of the initial public offering on Wednesday that the company had actually benesfited from the trade war.
"There has actually been a huge boom in our business, accelerating our growth rates in markets like China because many of the well-located land parcels had factories on them and many of those factories have shifted production in some instances to places like Vietnam," said Perlman, who is also the managing diretor and head of Southeast Asia at Warburg Pincus. "And so we're working directly with local governments [to use] factories [that are] no longer producing. So this [has been] very helpful and additive to our business over the last 12 to 18 months."
It is the largest Asia-Pacific focused logistics real estate platform by gross floor area and by value of assets owned directly and by the funds and investment vehicles it manages, according to consultancy JLL.
“A typical e-commerce tenant requires three times the space than a traditional retailer would need of warehousing. There’s much greater velocity that goes through the warehouse,” said Perlman. “Our vacancy rates in major cities, in some instances, are almost zero.”
ESR said that some 90 per cent of the proceeds will be used to repay debt and the rest will be used for developing logistics property and other investments.
Net profit for the financial year ended December 2018 rose to US$213.13 million, up 5.9 per cent year on year, according to its prospectus. Revenue rose 65.8 per cent to US$254.15 million year on year.
ESR plans to raise up to $1.24 billion in Hong Kong's biggest share listing this year
HONG KONG (Reuters) - Logistics real estate developer ESR Cayman Ltd kicked off an initial public share offering (IPO) on Wednesday, hoping to raise up to $1.24 billion in Hong Kong's biggest float so far this year.
The company, backed by private equity firm Warburg Pincus LLC, was initially due to launch its offering on Monday, but held off as markets were shaken by fears of escalating Sino-U.S. trade tensions.
ESR manages a range of funds as well as its own directly held property investments. It is selling 560.7 million shares with a split of 58% primary shares and 42% secondary - totaling 18.4% of its enlarged share capital - at an indicative range of HK$16.2 to HK$17.4 ($2.07 to $2.022) a share.
Within that range, the firm could therefore raise $1.16 billion to $1.24 billion before any over-allocation option is included. That would give the firm a market capitalization of up to $6.75 billion after the IPO.
Seven existing shareholders are selling shares in the IPO, including Warburg Pincus, Goldman Sachs Investments Holdings (Asia) Ltd and e-commerce firm JD.com Inc's Jingdong Logistics Group Corp, according to a term sheet seen by Reuters.
Main backer Warburg Pincus unit WP OCIM plans to cut its holding to about 28% from 38.35%.
"We had to ask some of the existing shareholders to sell some shares in order to meet the desire by other public market investors for us to have a meaningful free float," ESR chairman Jeffrey Perlman said at a press conference.
He added that the company did not need "incremental capital given the funding o the business."
ESR said it plans to use the proceeds to pay down debt, redeem preference shares and invest in property assets and potential acquisitions.
The shares will be priced on June 12 and trading is scheduled to start on June 20.
Warburg Pincus and Goldman declined to comment. JD.com did not respond to a request for comment.
The float comes as the Hong Kong market is beginning to heat up, with two other deals which could raise over $1.6 billion between them, due to price on Wednesday.
A successful float by ESR would further provide a boost for the city which is far behind the New York Stock Exchange and Nasdaq in raising capital via IPOs, with just $5.9 billion raised as of May, compared with a combined $26.9 billion raised by the U.S. exchanges, showed data from Refinitiv.
The biggest listing in the Asian. financial hub so far this year has been that of Chinese securities firm Shenwan Hongyuan HK Ltd which raised $1.2 billion in April.
Last week, Reuters reported that Chinese e-commerce giant Alibaba Group Holding Ltd was considering a second listing in Hong Kong of up to $20 billion in what could be a transformative deal if other New York-listed Chinese tech groups followed its lead.
ESR was formed in 2016. by the merger of the Japan-centric Redwood Group and China-focused e-Shang. It described itself in its prospectus as the largest Asia-Pacific logistics-focused property platform.
CLSA and Deutsche Bank are joint sponsors for the IPO.
(Refiles to inserting missing letter in CLSA in paragrapoh 17.)
ESR is the largest Asia-Pacific focused logistics real estate platform by gross floor area (GFA) and by value of the assets owned directly and by the funds and investment vehicles it manages . Co-founded by its senior management team and Warburg Pincus, ESR is backed by some of the world’s preeminent investors including APG, SK Holdings, JD.com, CITIC CLSA, Goldman Sachs, CPPIB, Ping An and Allianz Real Estate. The ESR platform spans across the People’s Republic of China, Japan, South Korea, Singapore, Australia and India. As of 30 September 2018, the fair value of the properties directly held by ESR and the assets under management with respect to the funds and investment vehicles managed by ESR exceeded US$14 billion, and GFA of properties completed and under development as well as GFA to be built on land held for future development stood at approximately 11 million square metres in total.
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