FINANCIAL REVIEW The development segment result decreased by 18.6% from US$289.2 million in FY2020 to US$235.3 million in FY2021. The decrease was attributable mainly to gain on disposal of Higashi Ogishima Site A amounted to US$19.4 million; and a gain on sale of development management rights of US$12.3 million in Australia to one of the Group’s joint ventures. There were no such material divestments of assets by the Group’s subsidiaries in FY2021. In addition, the Group recorded a lower share of fair value of its coinvestments in funds post-completion of development and sell down of assets held by its co-investments in FY2020. The decrease in development segment result is partially offset with the increase in fair value from new developments in China. ASSETS The Group had a robust and well-capitalised balance sheet with US$1.6 billion in cash. Total assets increased from US$7.7 billion as of 31 December 2020 to US$9.3 billion as of 31 December 2021. Increase in total assets was mainly driven by new investments in associates in Australia and China, acquisitions of strategic data centres assets; as well as goodwill arising from Milestone Operations Limited (“MOL”). Investment properties increased by 39.1% to US$3.7 billion as of 31 December 2021 (FY2020: US$2.7 billion). The increase was contributed by ESR’s strategic acquisitions of prime assets near Osaka CBD, Japan that will be developed into a 98 MW multi-phase data centre campus; and an asset in Kwai Chung in Hong Kong that will be redeveloped into a 25 MW data centre; development of projects including ESR Shanghai Qingpu Yurun Phase II, an ESR flagship project, as well as fair value appreciation across ESR’s properties portfolio. Investment in joint ventures and associates increased by 23.0% to US$1.3 billion as of 31 December 2021 (FY2020: US$1.1 billion) contributed by the Group’s acquisition of ESR Milestone Partnership in June 2021, in addition of higher share of results from existing joint ventures in China and South Korea. Increase in goodwill of US$202.4 million to US$542.6 million as of 31 December 2021, was from acquisition of MOL. The Group also recorded an increase in intangible balances, net of amortisation; and deferred tax assets from the acquisition of MOL. Investment in listed securities decreased by 11.3% to US$779.4 million (FY2020: US$878.3 million), which was mainly due to a disposal of Centuria Capital Group (“CNI”) shares during the year. The reduction was partially offset with an increase in holding of the Group’s existing investments in ESR Kendall Square REIT on the KRX KOSPI market and increase in fair values of the Group’s other existing listed securities investments. LIABILITIES Total bank and other borrowings as of 31 December 2021 were US$4.2 billion compared to US$3.3 billion as of 31 December 2020. With cash balance of US$1.6 billion, the net debt to total assets as of 31 December 2021 was 27.9% (FY2020: 23.2%). During the year, the Group continued to diversify its funding sources and lower its borrowings costs to support its long-term growth: • In April 2021, ESR entered into US$400 million (with a US$100 million incremental option) unsecured term loan facility which consists of a three-year tranche of US$267 million at Libor plus 2.75% and a five-year tranche of US$133 million at Libor plus 3.25%. • In November 2021, ESR closed its first SustainabilityLinked Loan (“SLL”) of US$700 million which was subsequently upsized to US$1 billion at Libor plus 2.25% and Libor plus 2.75% for 3-year and 5-year tranches respectively. The loan has a tiered incentive mechanism whereas ESR will be entitled to an interest reduction as sustainability targets are achieved. The first US$500 million was drawn down in November 2021 and another US$500 million has been drawn down post year-end. Further to refinancing with longer tenor corporate borrowings, the Group’s weighted average debt maturity had increased to approximately 4.5 years (31 December 2020: 3 years) as of 31 December 2021. R E A C H I N G N E W H E I G H T S 18 ESR STANDALONE FY2021 STRATEGIC REPORT
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