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ESR Group Limited Annual Report 202431STRATEGIC REPORTSCORPORATE GOVERNANCEFINANCIAL STATEMENTSFinance cost increased marginally by 0.4%, from US$312.9 million in FY2023 to US$314.1 million in FY2024, with slight increase in total borrowings from US$6.0 billion as at 31 December 2023 to US$6.1 billion as at 31 December 2024. This was largely attributable to a delay in receipt of net proceeds from capital recycling transactions which were completed in late December 2024 and January 2025. Nevertheless, the weighted average interest cost of the Group%u2019sdebtportfolioreducedby60-basispointsto4.7%as at end December 2024, down from 5.3% as at December 2023.Administrative expenses increased by 51.3% from US$460.5millioninFY2023toUS$696.7millioninFY2024,mainlyduetotheUS$97.4millionimpairmentofthenoncoredivestmentofUSHTandUS$147.7millionimpairmentof the Group%u2019s investment in Cromwell as mentioned above.SEGMENT RESULTSThe Group reported fund management segment revenue ofUS$497.8millioninFY2024,withrecurringcoreassetfee income increased approximately 6.6% y-o-y. However, reduced transaction activity across the Group in FY2024 resulted in lower transaction-based fees. Additionally, no promote fee income was recognised during the year, compared to US$182.3 million in FY2023. Weakened APAC currencies against the USD also impacted result. Consequently, the fund management segment results decreasedbyUS$302.7millionor52.7%fromUS$574.7millioninFY2023toUS$272.0millioninFY2024.The investment segment reported a loss of US$560.1 million in FY2024, compared to a profit of US$34.1 million in FY2023. This loss primarily resulted from a US$106.1 million revaluation loss on three balance sheet assets in Mainland China, sold to form the initial portfolio of ESR C-REIT; US$322.4 million downward fair value adjustments of other China assets in Mainland China; US$65.3 million shareoffairvaluelossfromCromwell;aUS$147.7millionimpairment of assets held for sale in Cromwell; and a US$97.4millionlossfromnon-coredivestmentofUSHT.Excluding Cromwell%u2019s fair value loss and impairments related to Cromwell and USHT, the investment segment%u2019s losswouldhavebeenUS$249.7million.The new economy development segment results declined by 96.5% from US$259.8 million in FY2023 to US$9.0 million in FY2024, primarily driven by lower fair value adjustment of certain Mainland China assets mentioned above.These losses were mainly due to the following non-cash items:Non-cash losses tied to non-core divestments or nearterm divestments1.ARA US Hospitality Trust (%u201cUSHT%u201d) write-down: US$97.4millionarisingfromthedivestmentofthe Group%u2019s stake in USHT manager and units. The divestment of this non-core platform was completed on 9 July 2024, in line with the Group%u2019s strategy to simplify and streamline the Group focus on New Economy. The amount was accounted for as impairment loss on asset held for sale and is adjusted under non-IFRS Measures for a like-forlike comparison with FY2023.2.Share of fair value losses and marked-to-market loss: approximately US$65.3 million being the Group%u2019s share of fair value loss attributable to Cromwell. This arose mainly from the asset revaluation of its investment portfolio as well as the sale of its European fund management platform and associated co-investments. The Group has identified its holding in Cromwell as a non-core investment and reclassified the investment to asset held for sale. Consequently, the carrying value of its investment in Cromwell was revalued based on the market price as at 31 December 2024. Hence, an impairment loss againstthecostofinvestmentofUS$147.7millionwas recognised. These amounts are adjusted under non-IFRS Measures for a like-for-like comparison with FY2023.Revaluation losses and lower fair value gains on balance sheets assets held1.Revaluation loss on three balance sheet assets divested: consistent with the Group%u2019s effort to optimise its balance sheet via asset divestment to ESR-managed vehicles to grow its Fee-related AUM and recurring fee revenue streams, three assets were sold to form the initial portfolio of the ESR C-REIT, which was successfully listed on the Shanghai Stock Exchange on 24 January 2025. Consequently, approximately US$106.1 million of revaluation loss being the difference between the fair market value of the listed portfolio and the carrying values on the Group%u2019s balance sheet was recognised.2.Marked-to market declines on yet-to-stabilise properties in Mainland China: approximately US$322.4 million in aggregate negative fair value movements related to certain newly completed properties in Mainland China. In view of a longer time period required to achieve stabilisation in occupancy and rent levels for these assets, their fair values adjusted downwards in 2024 from their valuation levels in the year before.