Warburg Pincus set for another partial exit from ESR

ESR said in a filing that the private equity firm is in the process of placing at least 138 million shares. Based on the November 25 closing price of HK$25.40, that position is worth approximately HK$3.5 billion ($451 million). The company’s stock dropped sharply at the beginning of trading on November 26 and was at HK$24 by mid-morning, down 5.3%.

Separately, Warburg Pincus said it was in negotiations regarding the sale of $350 million in shares to a trust that represents Jinchu Shen, one of the Chinese entrepreneurs with which it co-founded ESR. The founders of pan-Asian warehousing operator Redwood – which merged with what was then e-Shang to form ESR in 2016 – will also be invited to participate in the deal as buyers. Shen currently has a 9.41% stake in the business, while the Redwood founders have 13.83%.

E-Shang was established following a recognition that China would need significant expansion in its logistics infrastructure to keep pace with the development of e-commerce. By the time ESR listed in Hong Kong in December 2019 it was the largest logistics real estate platform in Asia Pacific by gross floor area.

“What surprised us a little bit was the vision was to create the leading Chinese logistics real estate platform, but because of our success in China our ambitions started to grow over time and then it became an opportunity to create the leading pan-Asian real estate logistics platform, and it has played out even beyond our own wildest expectations,” Jeffrey Perlman, head of Southeast Asia and Asia Pacific real estate at Warburg Pincus, who was involved from the outset, recently told AVCJ.

ESR raised HK$14.3 billion through its IPO after the overallotment option was partially exercised. Warburg Pincus sold HK$7.8 billion worth of shares in the offering, reducing its holding from 37.48% to 18.66%. Two subsequent share sales – one of them to Ontario Municipal Employees Retirement System, now the largest shareholder with 15.96% - generated an estimated HK$5 billion. After the impending transaction, the GP’s remaining interest will be worth approximately HK$3.3 billion.

As of June, ESR had 18.7 million square kilometers in gross floor area in operation and under development, with 315 properties across the region. The company spins out assets from its balance sheet into an assortment of vehicles, raising capital from third-party investors. Total assets under management are $26.5 billion.

Revenue came to $357 million in 2019, up from $240 million the previous year, while net profit rose from $213 million to $278 million. For the first half of 2020, revenue was up 20.6% year-on-year at $151 million and net profit rose 72.1% to $145 million.

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• Topics
• Greater China
• North Asia
• IPO
• Real estate
• Infrastructure
• Warburg Pincus Asia
• Logistics
• China