ESR-REIT Placement: Acquisition and AEI Are DPU Accretive but Debt Payment Dilutes

Lakshmi Iyer, CFA

Credit

<p>We think the <a href="https://www.smartkarma.com/entities/esr-reit" target="_blank" data-smartkarma-citation="entities:10934:1" rel="noopener">ESR-REIT (EREIT SP)</a>  perpetual (4.6% perpetual callable on 3-11-22) is expensive with respect to its senior bonds as well as perps issued by comparable credits. The merger, which would have been a credit positive event, does not appear likely at present. Also, the bond has run up around 3 points over the past month. In light of all the above reasons, we find it expensive. We prefer the senior debt.</p><div class="content-highlight"><p><em>Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.</em></p></div>

We think the ESR-REIT (EREIT SP)  perpetual (4.6% perpetual callable on 3-11-22) is expensive with respect to its senior bonds as well as perps issued by comparable credits. The merger, which would have been a credit positive event, does not appear likely at present. Also, the bond has run up around 3 points over the past month. In light of all the above reasons, we find it expensive. We prefer the senior debt.Fundamental credit research focused on Asian high yield, including coverage of areas which are generally overlooked such as Indian finance companies and non-USD denominated credit (SGD).  Sector agnostic. Research process consists of rigorous bottom-up company analysis combined with spotting market dislocations to provide trade ideas.

ESR REIT 4.6% Perpetual - Appears Expensive

ESR-LOGOS REIT

ESR REIT 4.6% Perpetual - Appears Expensive