ESR-REIT Annual Report 2024 39 Strategies/Growth Opportunities ESR-REIT’s capital management strategy remains nimble and agile, allowing it to respond effectively to interest rate movements and position itself for sustainable growth. As at 31 December 2024, ESR-REIT’s gearing stood at 42.8%, with an ICR of 2.5x, well above the regulatory requirement of 1.5x. ESR-REIT has also successfully reduced its all-in cost of debt to 3.84%, down from 4.03% as of 30 June 2024, with a continued downward trend expected. This is driven by the: (a) refinancing of FY2025 expiring debt at approximately 15 bps lower margins, (b) early refinancing of FY2026 debt without prepayment penalties, (c) refinancing of hedges at lower rates, and (d) potential redemption or exchange of the remaining S$75.3 million 6.632% coupon perpetual securities. With 74.8% of its interest rate exposure fixed and an extended weighted average debt expiry of 2.8 years as at 31 December 2024 (up from 2.1 years in June 2024), ESR-REIT maintains a well-diversified and disciplined debt maturity profile. Additionally, its strong liquidity position, with S$790.2 million in debt headroom1 and S$235.8 million in committed undrawn revolving credit facilities, is reinforced by a robust banking network of 11 lenders. By adopting a proactive and strategic approach to capital management, ESR-REIT remains well-positioned to navigate the evolving macroeconomic conditions while continuing to drive long-term growth and value creation. Strategies/Growth Opportunities ESR-REIT has been strategically rebalancing its portfolio to increase exposure to the New Economy sectors of Logistics and High-Specifications Industrial assets. This approach capitalises on the wave of technology advancements and growing demand for modern industrial spaces driven by the evolving needs of end-users. To support this transformation, AEIs have been undertaken at ESR-REIT’s High-Specifications Industrial assets, such as 16 Tai Seng Street and the completed 7002 Ang Mo Kio Avenue 5. These enhancements will equip the buildings with higher specifications, ensuring they are future-ready to cater to the growing needs of the electronics manufacturing sector. In addition, the planned redevelopment of 2 Fishery Port Road is set to deliver turnkey cold storage space solutions, catering to the expanding cold chain sector in Singapore. Looking ahead, we will continue to pursue AEI opportunities to upgrade and future-proof our assets, ensuring they continue to meet the evolving needs of industrialists. 1 Assuming gearing limit of 50%. From 28 November 2024, the Monetary Authority of Singapore issued revisions to the Code on Collective Investment Schemes to rationalise leverage requirements for the REIT sector which imposes a minimum interest coverage ratio of 1.5 times with a single aggregate leverage limit of 50% will be applied to all REITs. 2 The S$341.5 million term loan was obtained by Tuas South Avenue Pte. Ltd., of which ESR-REIT has a 51% ownership interest. Strategies/Growth Opportunities ESR-REIT has continued to implement ESG initiatives across its portfolio and significant progress has been made on its Decarbonisation Roadmap for the Singapore portfolio. Furthermore, ESR-REIT has also embarked on the development of a Decarbonisation Roadmap for its overseas portfolio in Australia and Japan, reinforcing its commitment to sustainability across all markets. Notable achievements include an increase in the Singapore portfolio solar capacity by approximately 12% from 13.8 MWp in FY2023 to 15.5 MWp in FY2024, and green building certification coverage from 10 to 18 buildings. In FY2024, ESR-REIT further strengthened its financial position by securing its inaugural sustainability-linked and green loans. This included a S$200 million sustainability-linked unsecured revolving credit facility in March 2024 and a S$225 million sustainability-linked unsecured term loan in October 2024, as well as a S$341.5 million term loan2 which had a green loan component in November 2024. By embedding ESG principles into its funding strategy, ESR-REIT is wellpositioned to capitalise on emerging growth opportunities while advancing its commitment to sustainable value creation.
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