PE-backed ESR postpones Hong Kong IPO

The company cited “current market conditions” as the reason for the postponement. The Hang Seng Index posted a small decline on June 13, although at one point it was down over 1.6%. This followed a drop of 1.8% the previous day as Hong Kong was rocked by protests over proposed extradition legislation. The index has gained 8.6% since the start of the year, but it fell by 9.4% during May.

ESR, which filed for a listing in early March, offered 560.7 million shares priced at HK$16.20-17.40 apiece. Had the IPO priced at the midpoint of the range, the company would have achieved a market capitalization of HK$49.3 billion, which equates to nearly 30 times its earnings for 2018. Kerry Properties has a similar market capitalization and its price-to-earnings ratio is 6.10.

The offering included 233.6 million existing shares, with Warburg Pincus, APG Asset Management, the General Electric Pension Trust, Goldman Sachs, and JD.com’s logistics unit all looking to pare their stakes. Warburg Pincus – the largest individual shareholder – planned to sell 188.8 million shares, reducing its holding from 38% to 27.8%. The private equity firm also agreed to transfer a small portion of shares to co-CEO Jeffrey Shen.

Warburg Pincus established China-based e-Shang in 2011 with Shen and Dongping Sun. It merged with Singapore warehousing operator Redwood in 2016 to form ESR. The company claims to be the largest Asia Pacific-focused real estate logistics platform by gross floor area (GFA) and asset value. It specializes in modern logistics facilities that cater to e-commerce companies, third-party logistics providers, retailers, manufacturers, and cold-chain logistics providers.

As of September 2018, ESR had 5.7 million square meters of completed properties, as well as 3.4 million sqm under construction and 1.9 million sqm of land held for future development. The company’s largest market is China, with Japan, South Korea, and Singapore of meaningful size. There is also a large undeveloped landbank in India through a joint venture with Allianz.

Total assets under management were $14.1 billion, of which $1.78 billion was on the balance sheet and $12.3 billion held across 18 funds and one Singapore-listed real estate investment trust (REIT). The funds had $4.8 billion in equity commitments. Revenue came to $153.3 million in 2017 – 61.5% in fee income from the fund management business – up from $96.7 million a year earlier. Over the same period, net profit rose from $105 million to $201.2 million.

ESR has received multiple rounds of private funding and both e-Shang and Redwood received PE support before that. Other investors listed in the prospectus include Korea’s SK Group, China Huarong Asset Management, Shanghai Pudong Development Bank, China Everbright, CMBC International, and StepStone Global.

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• Topics
• IPO
• Greater China
• North Asia
• South Asia
• Real estate
• IPO
• Infrastructure
• Logistics
• Asia
• Warburg Pincus Asia
• APG
• Goldman Sachs