Logistics Giant Bucks Withdrawal Trend

At a time when property funds are scrapping earnings guidance, Asian logistics giant ESR says there has been “minimal disruption” to its development pipeline and remains optimistic about its 2020 outlook.

The Hong Kong-listed logistics platform—ESR completed a US$1.8bn IPO in November—said that it does not expect “significant impact” from Covid-19 on the group’s operations in the near term.

ESR became one of Australia’s largest industrial players after completing its takeover of Propertylink in March 2019—and reportedly looked to up its stake in Centuria Capital earlier this month.

ESR, which is backed by private equity firm Warburg Pincus, said healthy leasing activity, particularly from e-commerce tenants, along with scarcity of existing investment-grade warehousing stock has propelled the group’s 2019 revenue more than 40 per cent to US$357.4 million (A$619m).

Of the group’s 43 construction projects, only two have been disrupted with ESR’s remaining 14 million square metre development pipeline on schedule. E-commerce and third-party logistics account for 60 per cent of ESR’s tenant make-up.

“For operating projects, only two out of 157 operating projects are temporarily shut. The rest [are] unaffected and remain open.”

ESR said that its strong liquidity—the group has US$884.m of cash and a net debt to total assets ratio of 26.6 per cent—will allow it to “evaluate attractive investment opportunities during this period of dislocation”.

ESR has rapidly expanded its Australian industrial portfolio after entering the local market in 2017. The group picked up a 21-hectare Horsley Park site for $142.5 million last year, flagging development plans for a 110,000sq m logistics park.

Elsewhere, ESR listed the state law building in Brisbane’s legal district with a $275 million-odd price tag in February. The group inherited a half stake in the tower as part of its Propertylink takeover.

ESR co-CEOs Jeffrey Shen and Stuart Gibson said that the group’s APAC-focused strategy positions it well to “ride numerous favourable trends over the long term”.

“We will prudently monitor current global events [and] continue to explore growth opportunities in different geographies.”

“Due to the impact of Covid-19, the group expects long-term structural changes in consumers consumption patterns [as] well as fundamental changes to how the supply chain will function going forward.”