GLP Expands Global Platform to Brazil; Established Market-Leading Presence with Significant Growth Opportunities
- Focus on the best markets: GLP partners with CPPIB, CIC and GIC in two joint ventures to acquire best-in-class platform in Brazil for total initial consideration of US$1.45 billion[1]
- Expands fund management platform: AUM will almost triple to US$7.2 billion, with significant growth in recurring fee income
- GLP will act as asset manager of the two joint ventures, with an experienced 40-person team on the ground
- GLP’s investment in the portfolios will generate a levered IRR of over 18%[2] with fees and promotes providing further upside
- GLP intends to fund part or all of its initial equity commitment of US$3341 million with a private equity placement
Singapore, 14 November 2012 – Global Logistic Properties Limited (“GLP”), one of the world’s leading providers of modern logistics facilities, today announces the signing of an agreement to expand its global network to Brazil. This transaction establishes the largest logistics platform[3] in Brazil with a strong development pipeline for further growth. This is consistent with GLP’s strategy to focus on the best markets and grow its fund management platform.
GLP will form two joint ventures with Canada Pension Plan Investment Board (“CPPIB”), China Investment Corporation (“CIC”) and Government of Singapore Investment Corporation (“GIC”) to acquire two portfolios of logistics facilities from Prosperitas[4] for a total initial consideration of BRL2.9 billion (US$1.45 billion). GLP’s initial equity requirement is BRL668 million (US$334 million).
In the first joint venture (“Stabilized JV”), GLP will partner with CPPIB, CIC and GIC to acquire a portfolio of 34 stabilized assets and one development project. GLP and CIC will each own 34.2% of the Stabilized JV, with GIC holding 20.0% and CPPIB 11.6%.
In the second joint venture (“Development JV”), GLP will partner with CPPIB and GIC to acquire a portfolio of five development projects. GLP will own 41.3% of the Development JV, with CPPIB owning 39.6% and GIC 19.1%.
88% of the two joint ventures’ combined assets are located in the primary logistics markets of São Paulo and Rio de Janeiro, which together generate greater than 40% of Brazil’s GDP.
GLP will act as the asset manager of the acquired properties. The existing on-the-ground 40-person team, with considerable local experience, will continue to be in charge of day-to-day operations, as well as building GLP’s platform in Brazil.
Jeffrey Schwartz, Deputy Chairman of GLP said, “This transaction represents a unique opportunity for GLP, giving us a market-leading position in Brazil, as well as a strong platform for future growth in the country. It is consistent with both our strategy to focus on only the best markets globally and in growing our fund management platform. This exciting transaction builds on our successful and market-leading businesses in China and Japan and we are confident that it will create long-term value for our shareholders.”
“We are delighted to be partnering with CPPIB, CIC and GIC, which demonstrates GLP’s ability to leverage its strong relationships with some of the world’s leading institutional investors.”
Attractive Market Dynamics in Brazil
Brazil is one of the world’s largest and fastest growing economies. It has reported robust average annual GDP growth of 4.0%[5] over the last seven years. This has yielded significant increases in employment and real wages, leading to strong real domestic consumption growth averaging 5.3% since 2005. Brazil’s rapidly expanding middle class, as well as its young, mostly urban population, will drive future economic growth and consumption, increasing the requirement for distribution facilities.
In addition to high levels of demand, Brazil has a markedly limited supply of quality logistics facilities. Supply of logistics space is around 6% of that in the US, with approximately 80% of the market unable to meet modern logistics requirements. Brazil’s logistics industry is supported by strong fundamentals, with vacancy for Class A assets in São Paulo of only 4% and robust annual rent growth of 12.9% (CAGR) since 2008. Outsourcing of logistics facilities is expected to drive future market growth, as companies look to increase supply chain efficiencies. Events such as the 2014 football World Cup and 2016 Olympic Games are likely to further increase productivity and consumption.
Strong Portfolio with Considerable Opportunities for Growth
The Stabilized JV owns 34 stabilized assets and one development project with a total owned Gross Leasable Area (“GLA”) of 1,216,020 square metres (“sqm”) (13.1 million square feet (“sq ft”)) with more than 87% of the GLA located within São Paulo and Rio de Janeiro. The stabilized assets are 100% leased, with a high-quality and diverse tenant profile and have a weighted average lease expiry of 8.5 years with inflation-linked lease contracts. Approximately 87% of the leased GLA caters to domestic demand.
The Development JV owns five development projects with total owned GLA of 750,938 sqm (8.1 million sq ft), with 90% of the GLA located within São Paulo. The projects are located in major industrial and logistic hubs with direct access to key transportation nodes and provide GLP with significant opportunities to grow its network of modern logistics facilities in the region. Expected future incremental development spend to complete the five development projects is US$455 million, with GLP’s share at US$188 million.
The Stabilized and Development JVs are expected to generate a levered IRR of over 18%[6], with fees and promotes providing further upside.
Expanding GLP’s Fund Management Platform
These joint ventures continue GLP’s strategy of expanding its fund management platform. Together with the J-REIT monetization announced on 1st November 2012, our assets under management will almost triple from US$2.6 billion to US$7.2 billion. The establishment of these joint ventures further extends GLP’s relationship with CPPIB, CIC and GIC.
Ming Z Mei, CEO of GLP said, “We are very excited to be entering Brazil, an attractive market with strong fundamentals and compelling opportunities for growth. Our proven ability to provide best-in-class, modern and flexible logistics solutions makes GLP ideally-placed to flourish in this significant, underserved market.
“GLP is now the leading provider of modern logistics facilities in three of the world’s most attractive markets. We remain mindful of the global economic conditions, but are confident that our unrivalled market presence in China, Japan and now Brazil positions us well for future growth.”
Key Transaction Terms
The joint venture agreements and purchase and sale agreement were signed on 14th November 2012 by GLP’s Brazilian subsidiaries. For its pro-rata share of the equity, GLP will initially contribute BRL386 million (US$193 million) to the Stabilized JV and BRL282 million (US$141 million) to the Development JV.
The Stabilized Joint Venture will assume BRL1.1 billion (US$534 million) of attractive onshore debt with a bullet-like repayment schedule. It has lower interest rates compared to alternative market financing options and has a weighted average maturity of around 8 years. GLP intends to fund part or all of its initial equity commitment of US$334 million with a private equity placement.
Completion of Transaction
The acquisition is scheduled to close early December 2012 when GLP will assume its role as the asset manager.
1 The disclosed initial consideration and initial capital call could be revised due to indexation, balance sheet adjustments and other items.
2 Unless noted, all exchange rates are reported as 1 USD = 2 BRL
3 Post taxes, pre-fees and pre-promote
4 Unless noted, all Brazilian real estate market data is sourced from CBRE and latest available company filings
5 Comprises three funds, namely Prep III Industrial Co-Investments, L.P., Prosperitas II – Fundo de Investimento em Participações and Prosperitas III – Fundo de Investimento em Participações
6 Unless noted, all economic data is sourced from Economist Intelligence Unit as of October 2012Post taxes, pre-fees and pre-promote
About Global Logistic Properties (www.glprop.com)
Global Logistic Properties ("GLP") is one of the world's largest providers of modern logistics facilities, with a market-leading presence in China, Japan and Brazil. It owns, manages and leases out 505 completed properties in 205 logistics parks spread across 60 cities in China, Japan and Brazil, forming an efficient logistics network with properties strategically located in key logistics hubs, industrial zones and urban distribution centres. By providing flexible solutions of Multi-tenant, Build-to-Suit and Sale and Leaseback, GLP is dedicated to improving supply chain efficiency to meet strategic expansion goals of the most dynamic manufacturers, retailers and 3rd party logistics companies in the world. The Group was listed on the Mainboard of Singapore Exchange Securities Trading Limited on October 18, 2010 (Stock code: MC0.SI). (As of Nov. 14, 2012)
Issued by: Global Logistic Properties Limited
GLP Investor relations & Media Contact:
Ambika Goel, CFA
SVP- Capital Markets and Investor Relations
Tel: +65 6643 6372
Email: agoel@glprop.com
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