ESR delivers strong financial performance in FY2020 and hits US$30 billion in AUM a year ahead of schedule

The Group’s
balance sheet and cash position remained robust. The Group had US$1.5 billion in
cash as of 31 December 2020, representing a 71.4%
increase from US$884 million in FY2019. Net debt to total assets declined by 3.4 pp to 23.2%.

Notes

i. Profit After Tax and Minority Interest (PATMI)

ii. Excludes fair value on completed investment
properties, equity-settled share option expense, listing expenses and tax effects of adjustments

iii. Adjusted EBITDA is calculated as profit before tax,
adding back depreciation and amortisation, exchange loss/(gain), finance costs,
equity-settled share option expense and the listing expenses, and eliminating
the effect of interest income and fair value gains on investment properties

Jeffrey Perlman, Chairman of ESR, said, “ESR
has continued its strong momentum and delivered outstanding performance in FY2020
despite the unprecedented challenges brought on by the global pandemic. COVID-19
has actually accelerated one of the major secular trends underpinning our
business – the growth of e-commerce where ESR is at the heart of the central
nervous system delivering the core ‘new economy’ infrastructure to our
best-in-class clients. With that favourable backdrop, 2020 was a year of
records for ESR, including new highs in leasing, fundraising, development
starts and development completions. Our strong financial results and operational
excellence have demonstrated not only our resilience, but also the strength and
power of our business model.

Having witnessed sustained strong capital
inflows and leasing demand, the logistics market has solidified its position as
the preferred real estate asset class in Asia. We expect e-commerce
acceleration and supply chain transformation to continue to benefit ESR as we
extend the platform deeper into our existing markets as well as into new
markets over the next 12 months. While we continue our focus on sustainable
growth, it is also extremely important for ESR to constantly drive positive
impact on the industry and create a purpose-driven culture for the communities
where we operate. In summary, we strive to be a leader in ESG and the Board and
senior management remain steadfast in achieving our ambitious 2025 ESG goals.”

Exceptional platform growth underpinned by strong fundraising

Supported by strong fundraising capabilities across
multiple markets, the Group’s AUM grew significantly by 35.3% to US$29.9
billion, achieving its target of US$30 billion a year ahead of schedule.

Capital allocation of investors is
increasingly skewed towards funds focused on logistics due to e-commerce acceleration. In FY2020, ESR raised a record US$3.5 billion in committed capital across seven new
funds, demonstrating the strong support of its blue-chip institutional capital
partners. The new vehicles included:

• three development joint ventures (US$500 million in China, US$759 million
  in Australia and US$300 million in India) and one core-plus partnership (US$456
  million in Australia) with GIC^[1]
• a US$1 billion development joint venture with APG and CPP Investments in
  South Korea;
• a core joint venture with Manulife in China (US$265 million); and
• a separate account of US$264 million with AXA in Japan.

Based on the latest fundraising initiatives,
there was over US$3.7 billion worth of committed but uncalled capital in ESR’s
third-party funds as of 31 December 2020.

In addition to private vehicles, ESR
successfully listed ESR Kendall Square REIT on the Korea Exchange in December
2020 and raised US$650 million in new capital. As the first logistics focused
REIT in South Korea, ESR Kendall Square REIT received overwhelming response
from both international and domestic investors. The listing has facilitated the
further scaling up of the Group’s integrated platform of public and private
vehicles to accelerate long-term growth.

ESR continues to be disciplined in executing
its capital recycling programme, and prudently redeploying capital to support
growth. In FY2020, close to US$1 billion of capital was recycled, with net cash
recycled back of approximately US$0.7 billion, doubling the Group’s annual
target of US$400-US$500 million in divestments.

Record new completions and new development starts drive continuous expansion
of our best-in-class asset portfolio

ESR has over 20.1 million sqm of GFA in
operation and under development across its portfolio and a landbank of over 3.7
million sqm, as of 31 December 2020.

Development demand has continued to grow, with
work in progress growing by 21% to US$4.7 billion in FY2020. The Group’s
development activities achieved new records, with US$3.4 billion in development
completions and US$3.2 billion worth of development starts (US$2.4 billion in
2H 2020) in FY2020. It will continue to leverage third-party capital to fund
development starts and exercise a disciplined asset light approach to achieve
its targeted development completions.

During the year, the Group has completed a
number of flagship developments that set new standards for the industry. In July
2020, the Group completed the development of the award-winning ESR Amagasaki
Distribution Centre in Greater Osaka, the largest logistics warehousing project
in APAC^[2] at 388,570 sqm. In Dongguan, China, ESR Hongmei Logistics Park II
commenced operations in Q4 2020, introducing a new flagship development with 278,283
sqm GFA in the country’s southern region.

E-commerce acceleration and supply chain
resilience have spurred demand for modern, institutional-grade logistics
facilities, driving the solid performance of ESR’s leasing activities. The
Group maintained a healthy occupancy rate of 90% across its entire portfolio^[3], and achieved record leasing of over 2.3 million sqm of space. Leveraging
its strategically diversified network spanning seven key markets across APAC,
coupled with a quality tenant base focused on e-commerce and 3PL companies which
accounted for 64% of the overall tenant portfolio (based on rental income), ESR
has remained resilient to market changes and disruption.

ESR is well-positioned to benefit from the
strong leasing demand with a robust pipeline of large-scale developments to be
delivered over the next couple of years. Some of these include:

• In China, the Group expects to complete the development of ESR Shanghai Qingpu
  Yurun Phase I by the end of 2021. This high-standard logistics facility with a
  total planned GFA of over 340,000 sqm will include cold storage space. Construction
  of Phase II commenced in Q4 2020.
• The Dushangang project in Jiaxing, China is scheduled for completion in
  2022 with a total planned GFA of over 235,000 sqm.
• In Japan, the Group has commenced construction of the first phase of ESR
  Higashi Ogishima Distribution Centre in Greater Tokyo Metropolitan Area, with
  expected completion in 2023. Set to be one of Japan’s tallest distribution
  centres and the world’s first cargo drone facility, the project has a planned
  GFA of 365,385 sqm.

Leveraging existing platform synergies to tap into a highly complementary
and rapidly expanding new asset class

The data centre market has proliferated through the
pandemic as a number of technological and economic trends, including e-commerce
growth, smart technologies, 5G adoption, AI and cloud services, continue to
drive the demand and requirements for data capacity. In APAC, which is the world’s second largest
region for data centres, the market is set for solid growth due to such factors
as being home to half of the world’s millennial population (aged 23-38); a dramatic increase in unicorns, many of which are
internet giants; and mobile data traffic that is projected to expand at a CAGR
of 41% from 2019-2023E.

As a leading provider of new economy infrastructure, ESR sees data
centres not only as a compelling asset class, but also a natural progression
for future growth. It
is expected that APAC data traffic will grow exponentially in line with
demographic tailwinds. ESR has directed significant business development effort
towards setting up around Asia. With its complementary strengths, development
expertise and knowledge, as well as immediate scalability with enhanced tenant
relations the Group has built over the years, ESR is highly competitive and
well-positioned to tap into this market.

Empowering sustainable growth by purpose and innovation

ESR has reaffirmed its commitment
to long-term sustainable growth with its Five-Year ESG Roadmap, which aligns with
the UN Sustainable Development Goals.

The Group has set out a clear vision
and targets across the three key pillars of Human Centric, Property Portfolio
and Corporate Performance. They include improving gender ratios, achieving zero
workplace fatalities, increasing solar power generation by 50%, reducing
group-wide energy consumption by 20%, and investing US$15 million in local
community foundations by 2030.

Strategies such as consistent, transparent
reporting, strengthening engagement programmes to promote health and well-being
and fostering a culture of active ESG learning for employees are planned and in
place to ensure that the Group’s 2025 targets are achieved.

For ESR, technological innovations are a way of
improving its customers’ operations, and providing for a more sustainable,
human-centric environment for stakeholders. The Group created the ESR Future
Solutions Group to proactively identify and evaluate technological, economic
and societal changes that are important to our stakeholders, and to determine
how these changes will impact the design and operations of logistics facilities
and the Group as a whole.

Propelling the next stage of growth and value
creation

E-commerce acceleration will continue to drive demand for logistics
infrastructure. In view of the significant undersupply of modern warehouses in
the APAC region, ESR will continue to actively examine opportunities in key
markets and new locations to grow its footprint. Moreover, it will look to build
on the Group’s network of high-quality tenants and best-in-class capital
partners to support its efforts in meeting the long-term need for modern logistics facilities in the region.

Looking ahead, the Group will continue its disciplined
capital management approach, which has been the cornerstone of ESR’s investment
efforts, leveraging its well-capitalised balance sheet and strong liquidity
position to further diversify its sources of funding to support sound,
strategic growth and investment opportunities as they emerge.

Jeffrey Shen
and Stuart Gibson, ESR Co-founders and Co-CEOs, stated, “Despite that FY2020
was a year of unprecedented challenges, it was also one of new opportunities
and breakthroughs. Evidenced by the strong results we delivered on multiple
fronts, our unique growth model and strategic approach have proven to be
successful especially within the context of a challenging year.

The APAC
logistics real estate industry has an abundance of momentum, propelled by a
myriad of driving forces. Our success built in FY2020, and in previous years,
reinforces our convictions towards the long-term prospects of APAC logistics. We
look forward to a vibrant future in which we can unveil many exciting
developments. Expanded market and asset portfolios, further collaborations with
the world’s best investors and brands, impactful ESG initiatives – all of these
and more are in the offing as ESR enters the next chapter of growth and
creation of long-term value to our stakeholders.”