GLP Reports Robust China Operational Momentum; Accelerated Fund Management Growth

GLP Reports Robust China Operational Momentum; Accelerated Fund Management Growth

GLP reported continued growth for the three months ended 31 December 2014 (“3Q FY15”) on the back of strong China operational results and further expansion of GLP’s fund management platform.

  • 3Q FY15 new and expansion leases in China up 25% YoY; development completions1  up 71% YoY
  • US$2.3 bn of Group development completions1 expected in FY2016, up 79% YoY
  • 3Q FY15 fund fees up 92% YoY; AUM to expand to US$20.4 bn with expected closing of US transaction 
  • 3Q FY15 earnings driven by solid rent growth in China, continued lease up of developments and further expansion of GLP’s fund management platform

 

US$   million

3Q

FY15

Pro-forma2   3Q

FY15 

YoY

Change

Pro-forma

YoY Change

YTD 3Q

FY15

Pro-forma YTD 3Q FY15

YoY Change

Pro-forma

YoY Change

Revenue

179

179

1%

30%

541

541

16%

27%

EBIT

223

229

(5%)

14%

696

757

(3%)

15%

Earnings   (ex reval)

66

72

(15%)

58%

135

192

(30%)

42%

Earnings

112

119

(36%)

(3%)

381

438

(27%)

8%

 

Singapore, 5 February 2015 – Global Logistic Properties Limited (“GLP”), the leading provider of modern logistics facilities in China, Japan and Brazil, reported continued growth for the three months ended 31 December 2014 (“3Q FY15”) on the back of strong China operational results and further expansion of GLP’s fund management platform.

3Q FY15 Group revenue was US$179 million, with earnings (PATMI) of US$112 million. Group earnings were 3% lower on a pro-forma basis mainly due to higher Japan revaluation gains in the prior year period. Pro-forma earnings excluding revaluation gains were up 58%.

Mr. Ming Z. Mei, Co-Founder and Chief Executive Officer of GLP, said: “3Q FY15 saw continued leasing and development momentum in China. This year, we brought several new investors into our China business, and these strategic partners are expected to strengthen GLP’s land sourcing capabilities and generate new business opportunities. We are also pleased to further grow our best-in-class fund management platform with our announced entry into the US logistics market. Looking forward, we will continue our three-pronged growth strategy of being the best operator, creating value through developments and expanding our fund management platform."

Value Creation Through Development

Value creation through development activities is an important part of GLP’s longer-term earnings. Key contributors of recurring value creation include revaluation gains earned on development completions, as well as development fees and promotes earned from capital partners’ share of development capex.

During the quarter, GLP completed 630,000 square meters (6.8 million square feet) of developments in China with a total investment cost of US$308 million. GLP’s effective share was US$138 million and the Company recognized US$40 million of development revaluation gains.

Value creation is expected to accelerate as GLP ramps up its development pace. The Company has commenced US$1.7 billion of new developments across China, Japan and Brazil year-to-date 3Q FY15. In FY2016, GLP expects to start US$3.4 billion of developments (GLP share: US$1.6 billion), up 30% year-on-year.

GLP's FY2015 expected China development completions of US$1.1 billion has been revised to US$1.0 billion due to delays in the completion permitting process. US$70 million of projects will be physically completed in 4Q FY15 and be completed when the permits are received two months later in May 2015. GLP remains on track to meet its FY2015 development completions target for Japan and Brazil. In FY2016, GLP expects to complete US$2.3 billion of developments (GLP share: US$1.0 billion) across the Group, up 79% year-on-year.

GLP’s development pipeline over the next three years is expected to generate approximately US$1 billion3 (GLP share) of revaluation gains earned on developments. 

Significant Growth in Fund Management Platform 

Fund management revenue in 3Q FY15 increased 92% year-on-year to US$31 million. This comprised asset and property management fees of US$15 million and development fees of US$16 million. Development funds allow GLP to expand its platform while generating attractive risk-adjusted returns. 

GLP’s fund management platform today comprises US$8.2 billion of invested capital, with a further US$4.1 billion of uncalled capital. In December 2014, GLP announced that it would be acquiring one of the largest logistics real estate portfolios in the United States for US$8.1 billion. The transaction is in line with GLP’s growth strategy of expanding into the best logistics markets internationally via its fund management platform and will bring the Company’s assets under fund management to over US$20 billion. 

The transaction is expected to close in 4Q FY15. GLP will initially hold a 55% stake in the acquired portfolio (“GLP US Income Partners I”) and intends to reduce its stake to 10%. Investor interest for GLP US Income Partners I is strong and GLP remains confident of completing the fund syndication by August 2015.

Mr. Mei said: “Fund management is a growing and important part of GLP’s business. Through the fund management platform, we are able to efficiently leverage capital to support long-term growth while enhancing returns on our equity. The continued strong support from our capital partners will sustain our growing fund management platform.” 

Operational Momentum Driven by Solid Customer Demand

More than 80% of GLP’s portfolio is driven by domestic consumption, which along with the limited supply of modern logistics infrastructure across all markets, drives GLP’s growth. During the quarter, GLP reported robust leasing momentum across China, Japan and Brazil.

Leasing ratios remain stable in 3Q FY15, with China at 89%, Japan 99% and Brazil 98%.  In China, GLP signed 600,000 sqm (6.5 million sq ft) of new and expansion leases in 3Q FY15, up 25% year-on-year. Rents on leases renewed during the quarter in China increased 7.3%. GLP sees significant customer demand underpinned by the growth in the fast moving consumer goods, retail, cold storage and e-commerce industries in China. In Japan, new and expansion leases in 3Q FY15 totaled 127,000 sqm (1.2 million sq ft), and rents on leases renewed during the quarter increased 2.2%. In Brazil, new and expansion leases in 3Q FY15 totaled 14,000 sqm (151,000 sq ft).

The scale and breadth of GLP’s platform generates a “Network Effect”, with 50% of the company’s customer base leasing property from GLP in multiple locations. During 3Q FY15, repeat customers comprised approximately two-thirds of new leases in China. 

Healthy Capital Base to Capitalize on Growth Opportunities

GLP remains well capitalized, with net cash of US$400 million as of 31 December 2014. 

Net debt to assets stands at 4% on a look through basis. With a strong balance sheet in place, GLP is well positioned to capitalize on growth opportunities and selectively expand its footprint. 

Earnings Call/Webcast Information

A briefing for investors and analysts is scheduled for Thursday, 5 February 2015 at 9am Singapore time. Please dial +65 6723 9381 to join the briefing (passcode: 56877831) or visit our website (ir.glprop.com) to access our webcast for the event. A replay of the briefing will also be available on our website.


About Global Logistic Properties (www.glprop.com)

Global Logistic Properties Limited (“GLP”) is a leading global provider of modern logistics facilities. As of 31 December 2014, GLP’s US$19 billion property portfolio encompasses 29 million square meters (312 million square feet) of logistics facilities across China, Japan and Brazil. GLP’s customers include some of the world’s most dynamic manufacturers, retailers and third party logistics companies. Domestic consumption is a key driver of demand for GLP. 

In December 2014, GLP announced its entry into the United States via its best-in-class fund management platform. The transaction is expected to be completed in 4Q FY15. The Group is listed on the Mainboard of Singapore Exchange Securities Trading Limited (SGX stock code: MC0.SI; Reuters ticker: GLPL.SI; Bloomberg ticker: GLP SP).

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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1 Total development cost of completed projects

2 Pro-forma financials provided for like-for-like comparison and were adjusted for: China investor consortium’s 33.8% stake in GLP China, sale of assets to GLP J-REIT, FX-related effects and material non-recurring items. For more detail on the adjustments, please see slides 23 & 24 of GLP’s 3Q FY15 earnings presentation 

3 Estimated US$8 billion of Group development completions (GLP share: 45%) at an estimated 25% value creation margin (FY14 average value creation margin: ~26%)