ESR-REIT Annual Report 2024 57 CAPITAL MANAGEMENT ESR-REIT’s capital management strategy is centered on maintaining a balanced and resilient capital structure supported by a strong credit profile, to effectively mitigate risks and deliver sustainable value to our stakeholders. We adopt a prudent and disciplined approach, regularly assessing and monitoring key capital metrics to ensure that they remain within both regulatory requirements and our internal risk thresholds. This strategy enables us to adapt to market conditions, such as fluctuating interest rates, while meeting our financial obligations and advancing our strategic growth initiatives. By prioritising prudent capital and risk management, we aim to safeguard our financial stability and support long-term value creation. KEY FINANCIAL INDICATORS As at As at 31 December 2024 31 December 2023 Total Gross Debt (S$ million) 2,269.7 1,566.2 Aggregate Leverage1 (%) 42.8 35.7 Weighted Average All-in Cost of Debt (%) p.a. 3.84 3.91 Weighted Average Debt Expiry (“WADE”) (years) 2.8 2.4 MAS Interest Coverage Ratio2 (times) 2.5 2.5 Interest Rate Exposure Fixed (%) 74.8 81.6 Weighted Average Fixed Debt Expiry (“WAFDE”) (years) 2.0 1.3 Proportion of Unencumbered Investment Properties3 (%) 72.4 95.8 Debt Headroom4 (S$ million) 790.2 1,311.9 Undrawn Available Committed Facilities (S$ million) 235.8 280.9 ESR-REIT’s capital structure remains healthy with aggregate leverage of 42.8% as at 31 December 2024. The aggregate leverage for FY2024 and FY2023 respectively have been disclosed on page 303 of the Financial Statements. Despite the increase in aggregate leverage from FY2023, the REIT’s debt headroom of S$790.2 million ensures that it is more than adequately positioned to pursue new growth avenues, including targeted acquisitions, portfolio enhancements, and redevelopment initiatives. The REIT’s balance sheet remains robust and not only supports our ability to act swiftly on strategic opportunities but also ensures we can comfortably manage any upcoming refinancing requirements. As such, the Manager does not expect the higher aggregate leverage to have a material impact on the risk profile of ESR-REIT. On 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 (ICR) of 1.5 times with a single aggregate leverage limit of 50% applied to all REITs. 74.8% of ESR-REIT’s borrowings have fixed interest rate exposure for a weighted average tenor of 2.0 years, thus allowing the REIT to remain nimble and capitalise on interest rate cuts when they occur while simultaneously minimising the impact of volatility from interest rate movements. ESR-REIT maintains a well-staggered debt maturity profile, with no more than 35.4% of debt expiring in each year. The weighted average debt expiry is currently at 2.8 years as at 31 December 2024. ESR-REIT’s exposure to derivatives has been disclosed in the Statements of Financial Position of the Financial Statements. The fair value of derivatives for FY2024 as “derivative assets” and “derivative liabilities”, was S$3.2 million and S$4.3 million respectively. The net fair value of derivatives represented 0.05% of the net assets of ESR-REIT as at 31 December 2024. 1 Includes ESR- REIT’s 49.0% share of the borrowings and total assets of PTC Logistics Hub LLP, but excludes the effects arising from the adoption of FRS 116 Leases. 2 Interest expense includes amortisation of debt-related transaction costs and distributions on perpetual securities but excludes finance costs on lease liabilities under FRS 116. 3 Excludes ESR-REIT’s 49% interest in 48 Pandan Road. 4 Assumes aggregate leverage limit of 50%.
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