Global Logistics Properties sets up US$7 billion China-focused fund
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Singapore-listed GLP has secured US$3.7 billion in equity commitments from seven unnamed investors, six of them national pension or sovereign wealth funds, for the CLF II fund. The largest China-focused logistics infrastructure fund so far, it will have an investment capacity of US$7 billion after adding leverage.
“We continue to see strong demand from China,” GLP chief executive Ming Z. Mei said. “Despite the recent headlines about the GDP growth slowdown, 7 per cent is by definition a healthy rate anywhere in the world. Retail consumption, which is more relevant to logistics demand, maintains a double-digit growth rate.”
Retail consumption, which is more relevant to logistics demand, maintains a double-digit growth rate
Ming Z. Mei, GLP chief executive
CLF II is an add-on to the US$3 billion CLF I, whose capital was fully allocated more than two years ahead of the planned investment horizon. GLP, created from a spin-off of US industrial property developer Prologis, dominates industrial property markets in China, Japan and Brazil. It is 36 per cent controlled by Singapore’s sovereign wealth fund GIC.
The US$7 billion in funds will be channelled to develop 13 million square metres of warehouses in four years. GLP, the fund manager, holds a 56 per cent stake.
China’s burgeoning industrial property market has lured investors from around the world – most recently Carlyle Group, Glodman Sachs and RRJ Capital – who believe a shifting economic pattern has created vast demand for modern warehouses, where courier firms, e-commerce outlets and third-party logistics service providers store, distribute and process goods.
“Over the last few years, many people make noises about raising capital. Actually raising capital is not the hard part. Executing on the ground is,” Mei said. “As the market gets heated up, it requires deeper knowledge of logistics patterns.”
“We continue to see strong demand from China,”
As capital flocked in, oversupply had started to surface in certain locations, he said.
“The market is no longer the way it used to be five, six years ago,” Mei said. “Supply and demand is more balanced now, with some markets oversupplied in the short term.”
CLSA senior analyst Yew Kiang Wong said: “The big question mark here is demand. These investments are in anticipation of future demand. Third-party logistics companies represent large demand potential and are GLP’s bread and butter. But there’s also some cannibalisation from e-commerce companies which are now trying to develop their own warehouses, such as Alibaba. So there’s some risk in that respect.”
GLP’s top tenants in China include e-commerce powerhouses JD.com and Amazon, and logistics firms Sinortans and Best Logistics.
Mei said it was getting harder to source new land. Due to lower tax and employment contributions, local governments are less willing to release land for logistics use.
In order to gain better access to land reserves and customers, GLP last year sold a 34 per cent stake in its China portfolio for US$2.5 billion to a consortium of state-owned investors including China Life Insurance, China Development Bank and Bank of China.
Questions & Answers
Q.What is the total investment capacity of the new CLF II fund and how much equity has been secured so far?
What is the total investment capacity of the new CLF II fund and how much equity has been secured so far?
The CLF II fund has a total investment capacity of US$7 billion, including use. It has already secured US$3.7 billion in equity commitments from seven unnamed investors, including national pension and sovereign wealth funds.
Q.Who are some of GLP's major tenants in China that create demand for their logistics properties?
Who are some of GLP's major tenants in China that create demand for their logistics properties?
GLP's top tenants in China include prominent e-commerce companies such as JD.com and Amazon. Also, logistics firms like Sinotrans and Best Logistics also feature among their key clients in the region.
Q.What challenge does GLP face when trying to acquire new land for its logistics developments in China?
What challenge does GLP face when trying to acquire new land for its logistics developments in China?
GLP is finding it harder to source new land for logistics use. Local governments are less willing to release land due to the lower tax and employment contributions typically associated with these facilities.
Q.What risks or concerns do analysts have regarding the high level of investment in China's logistics market?
What risks or concerns do analysts have regarding the high level of investment in China's logistics market?
Analysts are concerned about potential oversupply in some markets and question future demand. There is also a risk of cannibalisation from e-commerce companies developing their own warehouses, like Alibaba.
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