ESR-REIT - OCBC Investment 2021-05-07: Expanding Footprint Overseas

ESR-REIT (SGX:J91U) | SGinvestors.io ESR-REIT (SGX:J91U)

ESR-REIT - Expanding Footprint Overseas

  • ESR-REIT (SGX:J91U)'s maiden overseas acquisition in Australia.
  • The acquisition is DPU accretive and will increase ESR-REIT's FY20 DPU by 2.9% on a pro-forma basis.
  • Equity fund raising to raise up to S$150m.



Singapore: proposed acquisition of 46A Tanjong Penjuru + two AEIs

  • ESR-REIT announced the proposed acquisition of a ramp-up, multi-tenanted warehouse at 46A Tanjong Penjuru and two AEIs at 16 Tai Seng Street and 7000 Ang Mo Kio Ave 5 for its Singapore portfolio. Total acquisition cost for the warehouse is ~S$124.7m with an initial NPI yield of ~6%. Management plans to spend S$6-8m over time to air-condition the warehouse to capture potential rental upside.
  • The transaction is expected to be DPU accretive with pro-forma FY20 DPU increasing 0.4%.
  • Separately, ESR-REIT announced two AEIs with total estimated cost of S$79.2m to create new gross floor area for high-specification assets.


Australia: proposed acquisition of a 10.0% interest in ESR Australia Logistics Partnership

  • ESR-REIT announced its maiden acquisition in Australia by acquiring 10.0% interest in ESR Australia Logistics Partnership from a subsidiary of the sponsor of ESR-REIT at AUD60.5m (initial yield of 6.8%). The fund has 37 logistics properties which are predominantly free-hold (81.4%), with built-in rental escalations averaging 2.5%-3% per annum.
  • The transaction is expected to be financed 100% through debt. Post-transaction, on a pro-forma basis, Australia will contribute 2.3% of rental income as at 31 March 2021.
  • The acquisition is DPU accretive and will increase ESR-REIT's FY20 DPU by 2.9% on a pro-forma basis.

Equity fund raising: private placement + preferential offering

  • ESR-REIT has launched an equity fund raising (EFR) to raise up to S$150m of proceeds, consisting of a private placement up to S$100m (issue price range: S$0.372 and S$0.384; at ~6.0% and 8.9% discount to the VWAP of S$0.4084 on 5 May 2021), as well as a preferential offering up to S$50m (details to be announced). The proceeds will be used to fund the Singapore acquisition, AEIs and to repay debt.
  • Post-transaction, on a pro-forma basis, ESR-REIT's FY20 DPU will increase 1.0% and gearing as at 31 Dec 2020 is expected to decrease from 41.6% to 41.4%. Including the divestment proceeds of S$53m, the pro-forma gearing is expected to fall further to 40.4%.
  • Maintain BUY on ESR-REIT.
  • See





Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-05-07
SGX Stock Analyst Report BUY MAINTAIN BUY 0.450 SAME 0.450



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