Management Discussion & Analysis 14 STRENGTH IN UNITY CAPITAL MANAGEMENT: CONTINUED FOCUS ON CAPITAL RECYCLING As at 30 June 2024, the Group’s gearing was 32.3%, with weighted average debt maturity of 4.0 years. The gearing would be approximately 30% upon the impending completion of the sale of ARA Private Funds and the formal launch of the ESR C-REIT. The weighted average interest cost was further reduced to 4.9% from 5.6% in 1H2023 as Management had tapped lower margin financing to refinance more expensive US dollar denominated debt. On the back of interest rates cut expectations, a 100 basis points decline in interest rate would lower interest expense by approximately US$50 million per annum. The increase in total borrowings was attributable to a timing spill-over for an asset loan refinancing where loan drawdown was in late June, ahead of the repayment in early July. The Group’s liquidity position remained sound. Management is executing on the staggered refinancing and planned repayment of the debt amounts due in the second half of 2024 via a committed sustainability linked loan facility of US$2.5 billion, with a greenshoe option to upsize to US$3.0 billion14. The Group remains steadfast in its capital recycling efforts through this period of protracted transaction duration at a pace that is slow but expected to pick up meaningfully with the anticipated U.S. Fed rate cuts. Transactions of approximately US$1 billion in gross value are pending completion, and another US$2 billion are in the pipeline to be executed. Management remains committed to reducing its gearing towards the low end of the range of 20–30%. DELIVERING ON ITS ESG COMMITMENTS The Group continues to strive towards its ESG efforts to create a positive impact on the environment and the communities. In 1H2024, the Group made significant progress against its targets set out under its ESG 2030 Roadmap, which was launched in May 2023. The roadmap Notes: 14. Expected completion by end FY2024 underscores the Group’s commitment to enhance its synergies and accelerate long-term sustainable growth across the three key pillars under the ESG Framework — “Creating a Human Centric environment that is safe, supportive and inclusive for stakeholders”; “Developing and maintaining a sustainable and efficient Property Portfolio”; and “Delivering outstanding Corporate Performance for sustained and balanced growth”. The Group continues to advocate diversity, equity, and inclusion in the workplace with female representation at 46.0% in 1H2024, representing a 0.6% increase from 45.4% in 1H2023. The Group also collaborates with partners and stakeholders to drive social impact efforts in the communities where it operates, aligned with its focus areas of “Strengthening Social Resilience, Health and Well-being”, “Promoting Education & Upskilling”, in addition to “Protecting the Environment”. Across the Group, close to 3,000 volunteer hours were clocked by employees in community outreach activities implemented in 1H2024. On the environmental front, the Group remains committed to developing and maintaining sustainable and efficient buildings and increasing sustainable building certifications and ratings. In 1H2024, 148 MW of rooftop solar power capacity (32% increase from 112 MW in 1H2023), as well as over 1,000 EV charging stations (24% increase from 809 in 1H2023), have been installed across the portfolio as part of its transition to a low-carbon future. Additionally, 45.8% of the Group’s portfolio of completed, directly managed assets has obtained sustainable building certifications and ratings such as LEED, WELL and NABERS. This represents a 3% increase from 42.8% in 2023. In the pursuit of net zero carbon, several of ESR’s business units have established decarbonisation targets. For example, ESR Data Centres has set an ambitious target to achieve 100% renewable energy use across all its data centre assets by 2040, with an interim target of 75% renewable energy by 2030.
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