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[SINGAPORE] Hong Kong-listed real asset manager ESR Group, the sponsor of Singapore Exchange-listed ESR Real Estate Investment Trust (ESR-Reit), expects to report a net loss of about US$730 million for the financial year ended Dec 31, 2024.
This would mark a reversal from the US$268 million net profit recorded in the prior year, said the group in a profit warning issued on Thursday (Mar 20).
The decline is mainly attributable to marked-to-market losses in asset and project revaluations. This was led by a US$320 million hit related to certain newly completed properties in China.
ESR noted that with weaker demand in 2024, these assets have required a longer time to achieve their targeted occupancy and rent levels.
It divested three assets to form the initial portfolio of ESR China Reit, which is listed on the Shanghai Stock Exchange.
As a result, about US$106 million of revaluation loss – the difference between the fair-market value of the listed portfolio and the carrying values on the group’s balance sheet – will be recognised for FY2024.
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The real asset manager noted a decline of about US$180 million in promote fees, as well as a fall in transaction-based fees.
Other non-cash items contributing to the decrease in profit include a write-down of about US$100 million arising from the divestment of the group’s stake in what was then called ARA US Hospitality Trust – now known as Acrophyte Hospitality Trust – and losses attributable to the group’s interest in Cromwell Property Group.
ESR noted that the volatile and uncertain environment that it operates in affected its profitability for FY2024.
However, it added that its underlying business is fundamentally resilient, underpinned by the sustained growth in core asset recurring fee incomes from asset, investment and property management.
It said: “The estimated net loss for the year is mainly driven by the movements in non-cash items resulting from these macroeconomic headwinds, and is not reflective of the expected long-term performance of the group.”
ESR will report its FY2024 results by end-March.
In December, a consortium of investors led by Starwood Capital Group, Sixth Street Partners and SSW Partners offered to take ESR Group private at HK$13 a share in cash.
The proposed offer is valued at HK$55.2 billion (S$9.5 billion) on an equity-value basis.
As at 11.53 am on Friday, shares of ESR Group were down 0.7 per cent or HK$0.08 at HK$12.32 on the Hong Kong bourse.
Units of ESR-Reit on the Singapore bourse were unchanged at S$0.245 before the midday trading break on Friday.
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