Management Discussion & Analysis 18 STRENGTH IN UNITY Investments in joint ventures and associates decreased to US$3.3 billion as at 30 June 2024 (31 December 2023: US$3.4 billion), mainly due to the abovementioned negative fair value movements relating to assets in Mainland China, share of fair value losses in Cromwell as well as write-down and reclassification of the ARA US Hospitality Trust manager and units to assets held for sale. Financial assets at fair value through other comprehensive income (“FVOCI”) decreased by 19.0% or US$199.1 million to US$851.3 million as at 30 June 2024, contributed by mark-to-market losses of US$91.5 million mainly from the Group’s quoted investments; as well as the reclassification of US$121.6 million pertaining to the disposal of ARA Private Funds to assets held for sale. Goodwill and other intangible assets decreased from US$4.8 billion as at 31 December 2023 to US$4.6 billion as at 30 June 2024, due to the non-core divestments of the ARA US Hospitality Trust manager and units and ARA Private Funds, in line with the Group’s key business priorities that include streamlining and simplifying the business with renewed focus on New Economy. Trade receivables decreased by 31.4% to US$365.4 million as at 30 June 2024 (31 December 2023: US$532.9 million) as 50% of the promote fee receivables were collected in 1H2024. Assets (net of liabilities) of a disposal group classified as held for sale increased significantly from US$60.6 million to US$675.7 million, arising from the reclassification of few investment properties to assets held for disposal; as well as the reclassifications of ARA US Hospitality Trust manager and units and ARA Private Funds as mentioned above. Total bank and other borrowings as at 30 June 2024 increased to US$6.2 billion (31 December 2023: US$6.0 billion). The increase was attributed to a timing spill-over for an asset loan refinancing where loan drawdown took place in late June 2024, ahead of the repayment in early July. TOTAL EQUITY Total equity as at 30 June 2024 remained relatively stable, with a slight decrease to US$8.1 billion from US$8.7 billion as at 31 December 2023. The primary factors included the loss for 1H2024 of US$209.0 million, an unrealised mark-to-market fair value loss of US$91.5 million on the Group’s FVOCI; and the share of unrealised currency translation losses of US$116.0 million from the Group’s joint ventures and associates due to the strengthening of US dollars against local currencies. In addition, the total equity as at 30 June 2024 is net of final dividend of US$67.4 million for the year ended 31 December 2023 and ESR Group shares repurchased totalling US$72.2 million. The Group manages and minimises its foreign currency exposures by natural hedges using various currencies via project as well as corporate level; it continues to assess the use of financial derivatives where appropriate to manage its foreign currency exposures. CAPITAL MANAGEMENT ESR adopts a proactive and disciplined capital management approach, and regularly reviews its liquidity position, debt maturity profile, and refinancing ahead of maturity. The Group maintains a well-capitalised balance sheet, and actively diversifies its funding sources through a combination of facilities with both local and international banks, as well as capital market issuances in optimising its costs of debt. ESR remains disciplined in executing its capital recycling programme, and prudently redeploying capital to support growth. The Group continues to actively leverage its fund management platform to unlock value and generate higher recurring fund management fees. This meaningfully enhances the Group's tangible return on equity while maintaining sufficient funding capacity across the Group. Net debt remained constant at US$5.1 billion compared to US$5.0 billion as at 31 December 2023. The Group’s liquidity position remains healthy, backed by a committed sustainability-linked loan facility of US$2.5 billion, with a greenshoe option to upsize to US$3.0 billion. The facility is expected to close by end of the year.
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