Warburg-Backed ESR Mulls REIT IPO of Korean Assets

(Bloomberg) -- Logistics real estate developer ESR Cayman Ltd. is considering an initial public offering of a real estate investment trust consisting of South Korean assets, people familiar with the matter said, weeks after it raised $1.8 billion in a Hong Kong listing.

The Warburg Pincus LLC-backed company recently invited banks to pitch for the potential share sale in South Korea, which could raise at least $500 million, said the people, who asked not to be identified as the discussions are private. The listing could happen as soon as next year, the people said. The REIT could consist of ESR Cayman’s existing assets in South Korea and other properties, one of the people said.

The composition of the REIT and other details of the offering have not been finalized as deliberations are at an early stage, the people said. Representatives for Warburg Pincus and ESR Cayman declined to comment.

ESR Cayman raised HK$14.1 billion ($1.8 billion) less than two months ago after shelving a first attempt in June, citing unfavorable market conditions. The developer of logistics warehouses has ridden the rapid growth of e-commerce in Asia, which has boosted demand for such properties. It bought a majority stake in Singapore’s Sabana Investment Partners Pte. after pledging to invest more than $1 billion in a logistics park in Yokohama, Japan.

ESR Cayman’s portfolio spans across China, Japan, South Korea, Australia, Singapore and India, according to its website. It lists six assets in South Korea, including Bucheon Cold Chain Logistics Park, Gachang Logistics Park and Juksan Logistics Park. In terms of assets under management, South Korea is the third largest for ESR Cayman with about $3.6 billion as of June 30, according to its IPO prospectus.

Amid ultra-low interest rates, investors have been piling into REITs, which offer decent returns. Property trusts across the region, and particularly in Singapore, have also been active both on the deal-making front and in fundraising.

Hong Kong saw its first REIT IPO in six years with China Merchants Commercial Real Estate Investment Trust’s debut this month, while South Korea also featured a successful property trust listing. LOTTE REIT Co., which raised $353 million in what was the first REIT IPO in the country in three years, has risen some 25% since its October debut.

The ESR Korean trust would add to what is shaping up to be a significant pipeline for South Korean IPOs in 2020. Credit card firm Hyundai Card Co. and SK Biopharmaceuticals Co. are both expected to list as soon as next year in sizable deals.

--With assistance from Shawna Kwan, Carol Zhong and Cathy Chan.

To contact the reporters on this story: Julia Fioretti in Hong Kong at jfioretti4@bloomberg.net;Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editors responsible for this story: Fion Li at fli59@bloomberg.net, Yudith Ho

©2019 Bloomberg L.P.