ESR-REIT Focuses on Stability After Years of Active Rejuvenation

SGX:J91U.SI:ESR-REIT

After two years of heavy portfolio rejuvenation, acquisitions, and equity fund raising, ESR-REIT is pivoting to stability. CEO Adrian Chui said the industrial REIT will focus on earnings from core operations — rather than capital gains — over the next 12 months to reassure investors of sustainable income.

Earnings Recovery from Core Operations

For 1HFY2025 ended June 30, core distribution per unit (DPU) rose 8.1% y-o-y to 10.765 cents, with 96% of total DPU coming from core operations. Revenue climbed 23.2% y-o-y, while net property income grew 30.1% to $166.3 million, boosted by contributions from acquisitions and recently completed asset enhancement initiatives (AEIs) at Ang Mo Kio and Senoko Loop.

Chui acknowledged investors had found past rejuvenation moves disruptive: “Now that AEIs are completed, assets are contributing income, and acquisitions are done, they see growth driven by underlying operations.”

Office, AEIs and Relevance Amid Tariffs

Key projects include the redevelopment of 21B Senoko Loop, now master-leased to NTS Singapore, and the AEI at 16 Tai Seng Street, which added high-spec industrial space. Chui said rejuvenation ensures assets remain relevant, especially as global supply chains shift under new U.S. tariffs.

“Trade flows are like water; they will find their way,” he said, adding that Singapore’s flexibility and ESR-REIT’s focus on 70% Singapore-based assets underpin resilience.

Debt Management and Divestments

Gearing stood at 42.6% in June, with management aiming to keep it around 40%. Chui stressed loan expiry management is as important as headline leverage, noting no more than 27% of loans mature in any year. All 2025 refinancing has already been completed.

ESR-REIT plans to divest smaller, short-lease assets worth $200–$400 million from 2026, recycling proceeds into debt repayment, buybacks, AEIs, and potentially acquisitions.

Diversified Portfolio Across Three Markets

As at June, ESR-REIT held 70 properties with $5.2 billion in AUM:

• Singapore: 50 assets, ~75% of AUM

• Australia: 18 assets, 10.4%

• Japan: 2 assets, 9.8%

• Funds (Australia): 4.8%

Chui said future expansion will follow four principles: ESR Group presence, funding market liquidity, risk-return alignment, and scalability. While Malaysia is “natural” given ESR’s presence, scalability and FX challenges make it unlikely for now.

Investor Outlook

Since April 29, ESR-REIT’s unit price has risen 33.7% to $2.74 as of Aug 29. With completed AEIs, stable refinancing, and stronger core earnings, Chui said unitholders can expect “business as usual” with a sharper focus on operational excellence.

“We’ve de-risked, extended leases, and are showing stable core income. Our job now is to stay relevant and prove resilience,” he concluded.

Thank you