ESR eying a foray into data center biz

ESR, a leading logistics real estate platform listed in Hong Kong is planning a foray into the data center business on the back of a successful Real Estate Investment Trusts listing.

A REIT is a company that owns and operates real estate properties. On December 23, Shares began trading in South Korea’s first dedicated logistics REIT, which debuted with a $650 million Initial Public Offering (IPO).

ESR Kendall Square is the Korea platform for ESR, a Hong Kong listed global logistics real estate investment company. ESR is a leading logistics real estate platform with a network spanning across the People’s Republic of China, Japan, South Korea, Singapore, Australia and India. ESR Kendall Square consists of Kendall Square Logistics Properties, Kendall Square Asset Management and Kendall Square REIT Management, established in 2014, 2016 and 2020 respectively.

The company is also looking to make a foray in the data centre segment too as it has its expertise in developing logistics projects would come in handy for building data centers, according to sources in the know.

“With the robust growth of e-commerce driven by a confluence of factors including the pandemic, public investors have shown a growing appetite for quality core assets that can generate stable, long-term returns. The successful listing of ESR Kendall Square REIT is a testament to the strong portfolios of quality assets, investors and tenants that our team has built through the years,” said Thomas Nam, CEO, ESR Kendall Square.

Long-term investors see huge opportunities in REITs. Among the institutions buying into the ESR Kendall Square REIT pre-IPO were Canadian pension fund Canada Pension Plan Investment Board (CPPIB), Seoul-based Military Mutual Aid Association, the Industrial Bank of Korea and the Korean Reinsurance Company.

Even in other markets, REITs have had initial success. Recently, Embassy Office Parks REIT backed by Blackstone and the Mindspace REIT also backed by Blackstone and real estate developer K Raheja Corp are the current players in this segment in India. The success of this investment vehicle has instilled confidence in other developers and investors, primarily with a commercial office portfolio, to list their assets under a REIT platform.

Jones Lang LaSalle Incorporated, an American commercial real estate services company which provides investment management services estimates that 270 million sq. ft. of office space would be eligible for REIT which translates to a potential investment of $33 billion. “Some of the key factors for the success of REIT are strong developer credentials combined with positive outlook for Commercial real estate, an established portfolio which ensures stability of returns via rental income.

Post the IPO, ESR Kendall Square REIT will be using the proceeds to purchase 11 stabilised logistics assets in the Greater Seoul and Busan areas, both through direct acquisitions and through buying out private funds managed by ESR Kendall Square.

Currently, ESR Kendall manages $7 billion in assets in Korea, across a portfolio of 684,095 square metres (7.4 million square feet). Ten of the properties have already been acquired, with an eleventh to be purchased by June.