Management Discussion & Analysis FORWARD TOGETHER 12 • In South Korea, the Group is developing a US$800 million logistics park, Busan New Port on a 685,475 sqm site (which is being reclaimed) located in Greater Busan, the country’s largest container terminal and the world’s sixth largest port by volume. • The Group has also started ramping up data centre developments with two data centres totalling 155MW in Japan and South Korea, which are seeded into ESR Data Centre Fund. • The LOGOS Consortium is currently developing Australia’s largest intermodal logistics precinct, the Moorebank Intermodal Precinct (MIP) in south-western Sydney, into a high quality industrial property and infrastructure including initial approval for 850,000 sqm of warehouse opportunities directly adjacent to key rail intermodal facilities. When fully developed, MIP will have an estimated value of A$4.2 billion. • LOGOS has partnered with Amazon Australia and AustralianSuper to develop a second Amazon Robotics fulfilment centre in Melbourne, Australia at the AustralianSuper owned Craigieburn Logistics Estate. The facility, which is estimated to be completed in 2025, will span over 209,000 sqm across four levels, making it the largest warehouse ever built in Australia, powered by advanced robotics technology. These two deals cement ESR and its subsidiary LOGOS as the “Developer of Choice” in Australia. In 1H2023, key development starts included ESR’s 253,000 sqm Asia Industrial Estate Suvarnabhumi which marks ESR’s maiden entry into Thailand, and the 50MW Keihanna data centre in Osaka, Japan. In the same period, the Group saw the completions of large-scale landmark logistics assets which included the second phase of ESR Yokohama Sachiura Distribution Centre and ESR Higashi Ogishima Distribution Centre in Greater Tokyo, Pyeongtaek Logistics Park in South Korea, as well as Chengdu Qingbaijiang Cold Chain Industrial Park and Shenyang Hualong Logistics Park in China. Robust balance sheet and strong liquidity to capitalise on New Economy opportunities ESR had healthy gearing of 27.6% and a strong balance sheet with US$3.0 billion in liquidity in cash, loan capacity of committed and undrawn debt facilities, which is sufficient to cover aggregate loan repayments for the next three years without any additional capital recycling. With the contracted divestments announced post 30 June 2023, the Group’s gearing will reduce by 170 basis points to 25.9%. The Group also has US$19.3 billion of dry powder in its active funds of which US$12.7 billion is from New Economy vehicles. In addition, given the rising interest rates, the Group has expanded and diversified its funding and capital structure which is crucial for fuelling the Group’s long-term growth. • ESR received an investment grade first-time ‘AA-’ rating with a stable outlook from the Japan Credit Rating Agency, Ltd in March 2023. • In June 2023, ESR launched two series of Japanese Yen denominated fixed rate bonds, (i) JPY20 billion 1.163% fixed rate notes due 2026; and (ii) JPY10 billion 1.682% fixed rate notes due 2030, under its US$2 billion Multicurrency Debt Issuance Programme. The Group continues to recycle assets with over US$2.5 billion of divestments since January 2022, achieving three times its annual historical target with a specific focus on crystallising gains from selected China balance sheet assets. The Group is focussed and on track to deliver more than US$1 billion of divestments in 2023. In addition, the Group remains very focussed on its asset-light strategy with a 7.4% average co-investment as of 30 June 2023, which meaningfully enhances the Group’s tangible return on equity while maintaining sufficient funding capacity across the Group.
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