Singapore-based industrial real estate operator Global Logistics Properties (GLP) has confirmed that it has agreed to a takeover offer amounting to S$16 billion (US$11.6 billion) by Nesta Investment Holdings. The Chinese consortium comprises China’s HOPU Investment Management, Hillhouse Capital Group, Hong Kong-based Bank of China Group Investment, Vanke, and SMG, which is owned by GLP Chief Executive Ming Mei.
This deal is by far the single largest acquisition deal in Asia for 2017. The group’s offer was S$3.38 per share, representing an 8 percent premium over GLP’s highest closing share price hit in 2013. Singapore’s sovereign wealth fund GIC, which holds a 37-percent share in GLP, has voted in favour of the transaction. The privatisation of GLP will be accomplished through a scheme of arrangement, which requires the approval of at least 50 percent of its shareholders and the High Court of Singapore.
Singapore listed-GLP is a leading provider of modern logistics facilities in China, Japan, Brazil, and the U.S. The group’s China’s assets make up 57 percent of its market value with Japan accounting for 25 percent and the U.S. and Brazil a combined 12 percent, according to its 2016 annual report. The company is also a real estate fund manager, overseeing around US$38 billion worth of assets.
Global industrial transaction volume up
The buyout comes as global transaction volume for industrial assets climbed 24 percent in the first half of this year, a significant gain compared with a 1 percent drop in volumes for the office sector and a 6 percent fall in the retail segment. The U.S., UK, Germany, Japan and Canada were the five largest industrial markets, according to JLL’s Global Capital Market Research Q2 2017.
“Investors just can’t get enough of the sector thanks to structural shifts in the global economy. The rise of automation, e-commerce, 3 PLs have all helped drive the growth of the industrial sector worldwide,” says the report. In the United States, industrial REITs (real estate investment trust) returned 9.93 percent in the first six months, the highest of any sector.
JLL Australia’s Head of Industrial Michael Fenton commented, “Nesta Investment will inherit a diverse portfolio of logistics assets with good growth prospects, in markets with huge population bases.. This will position them exceptionally well to take advantage of changing retail and e-commerce habits; supply chain restructuring; reshoring of industrial production and the adoption of new technologies. China’s Logistics Market
In Asia, China’s logistics sector continues to offer exceptional long-term opportunities as the country builds its supply chain infrastructure, says Head of Industrial Stuart Ross of JLL China. GLP’s China logistics markets network covers about 90 percent of the country’s economy, according to its annual report. “China remains undersupplied relative to its economic size, and e-commerce continues to develop at a rapid pace,” says Ross.
Based on JLL’s China60 report, Grade A warehouse stock in China totalled about 29 million square metres (sqm), in comparison to U.S. major markets’ share of nearly 155 million square meters. According to GLP, the warehouse stock per capita in the Asian country currently represents only 1/13th of that in the U.S.
Driven by China’s booming online sales, expansion of its China e-commerce business has outpaced the rest of GLP’s portfolio. E-commerce as a percentage of the company’s total leased area in China increased from four percent in Financial Year 2010 to 26 percent today, despite the overall portfolio tripling in size, the company said in its annual report.
Growth seen in Japan and the U.S.
Similarly, prospects for the logistics sector in Japan are also positive. Vacancy rates remained low in Greater Tokyo and Osaka, where GLP’s portfolio is concentrated, said GLP. According to JLL’s Tokyo Logistics Market Summary 2016 Q4 report, vacancy rates dived last year amid a boost in occupancy in completed buildings. In 2017, new supply is anticipated to reach 722,000 square meters or 110 percent of the annual average in the last decade.
In the United States, vacancy rates stood at 5.2 percent while rent grew 6.6 percent on an annualised basis in the first six months of this year, according to JLL’s Global Capital Market Research Q2 2017. “Thanks to tight supply and sustained occupier demand, these factors have contributed to the investment frenzy in the sector, and first-half volumes are at their cyclical high,” writes the report.
With its diverse portfolio in the key markets of China, Japan, and the US, the new owners of GLP will continue to benefit from limited logistics supply and growing demand for such facilities, says Fenton.
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Head of Industrial, JLL Australia