ESR-REIT merger with VIT catapults the REIT to top 5 largest industrial S-REIT, bags win in SBR Listed Companies Awards 2019

ESR Funds Management (S) Limited won the Real Estate category after a landmark merger completion.

The merger between ESR-REIT and Viva Industrial Trust was the first of its kind in the island, resulting in an enlarged and enhanced portfolio that is looking to take the Singapore REIT market by storm.

ESR Funds Management (S) Limited, the manager of ESR-REIT, won in the Real Estate category of Singapore Business Review’s Listed Companies Awards 2019, which recognises innovative projects and best practices with significant business impact. In 2018, ESR-REIT merged with Viva Industrial Trust, marking the first-ever merger between two S-REITs into an enlarged trust by way of a Trust Scheme of Arrangement. After the landmark merger’s completion, ESR-REIT was catapulted into the Top 5 largest industrial S-REITs listed on the SGX Mainboard, with a combined asset size of approximately $3.02 billion and a diversified portfolio of 57 properties with a total gross floor area of 14.1 million square feet across four sub-asset classes in Singapore’s key industrial zones, as at end-2018.

 “The portfolio’s strategic combination of business parks and high-specs industrial assets, as well as logistics and warehouse and general industrial properties in sub-sectors with higher rentals and favourable supply-demand dynamics, resulted in an enhanced portfolio quality and scalability that provides a greater exposure to high-specifications and high value-added tenant pool,” said ESR Funds Management.

A larger portfolio has also enabled ESR-REIT to unlock greater economies of scale, strengthening its bargaining power over service providers and enhancing its flexibility to undertake asset enhancement and redevelopment initiatives. The company is also expecting that the resulting larger, fully unencumbered portfolio with lengthened debt tenor will expand its access to pools of capital and lower its cost of debt.

“With a larger post-merger market capitalisation and increased free float, ESR-REIT has enjoyed a higher trading liquidity and increased analyst coverage post merger, and attracts a larger investor base which could potentially lead to more index inclusions,” the REIT manager added.

Looking forward, the manager of ESR-REIT plans to sustain its rollout of asset enhancement initiatives in response to growing risk-averse behaviour among industrialists on the demand side amidst uncertainties from ongoing global trade tensions, according to Adrian Chui, CEO and Executive Director of ESR Funds Management (S) Limited.

In its latest quarterly results released in late April 2019, the manager more than doubled its net property income to $48.6 million over the same period last year and identified up to seven assets for asset enhancement initiatives over the next 3 years, including c.1 million square feet of unutilised plot ratio. 7000 Ang Mo Kio Avenue 5 and 3 Tuas South Avenue 4, 16 Tai Seng Street and UE BizHub EAST are some of those properties being eyed for this rejuvenation.

“During this quarter, we continued on our plans to carry out rejuvenations and asset enhancement initiatives for several identified assets to ensure our portfolio is ‘future-ready’ to meet the growing and changing demands of the ‘industrialists of tomorrow,’” said Chui.

ESR-REIT’s cautiously optimistic outlook also factors in the robust support it expects to continue receiving from its Sponsor, ESR, 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, according to a market report by JLL . ESR contributed $62.0M to facilitate the merger with Viva Industrial Trust and provided a $125.0M backstop in ESR-REIT’s preferential offering in March 2018. In addition, the Sponsor provides ESR-REIT access to regional tenant networks and a potential pipeline of assets and grants the REIT a first look at its US$16b portfolio of assets.

The Listed Companies Awards, presented by Singapore Business Review, was held last 11 July 2019 at Conrad Centennial Singapore.

This year’s nominations were judged by a panel consisting of Henry Tan, Managing Director, NEXIA TS; Choo Eng Chuan, EY Asean Markets Leader and Partner, International and Corporate Tax Services, Ernst & Young Solutions LLP; Ng Jiak See, Executive Director, Head of Corporate Finance Advisory, Deloitte Singapore & Southeast Asia; and Toh Kim Teck, Assurance Partner, Foo Kon Tan LLP.

Check out the event photos during the awards night here.

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