GLP Reports Strong FY15 Operational Momentum; Accelerated Fund Management Growth

GLP reported continued growth for the year ended 31 March 2015 (“FY15”) on the back of strong China operational results and further expansion of GLP’s fund management platform.

• Strong earnings growth from core operations with FY15 pro-forma earnings (PATMI) excluding revaluations up 31% y-o-y
• US$183 million of development gains in FY15, on the back of record US$516 million China development completions in 4Q
• China lease ratio¹ up 170 bps q-o-q to 91% on the back of record 1.2 million sqm of leasing in 4Q FY15; Same-property NOI growth of 7.0% y-o-y in FY15
• Fund management AUM up 80% y-o-y to US$20.0 billion; Annual fund fee run rate of US$150 million²
   

US$  million	FY15	Pro-Forma3FY15	YoY Change	Pro-forma  YoY Change	4Q FY15	Pro-forma  4Q FY15	YoY Change	Pro-forma  YoY Change
Revenue	708	708	13%	25%	167	167	6%	21%
EBIT	910	970	(4%)	12%	214	214	(7%)	2%
Earnings (ex  reval)	201	257	(19%)	31%	65	65	24%	10%
Earnings	486	543	(29%)	(1%)	105	105	(34%)	(24%)
Diluted EPS (in US cents)	9.4	10.6	(31%)	(2%)	2.0	2.0	(37%)	(26%)

 

Singapore, 14 May 2015 – Global Logistic Properties Limited (“GLP”), the leading provider of modern logistics facilities in China, Japan, Brazil and the US, reported continued growth for the year ended 31 March 2015 (“FY15”) on the back of strong China operational results and further expansion of GLP’s fund management platform.

Mr. Ming Z. Mei, Chief Executive Officer of GLP, said: “We are pleased to announce solid results in each of our business segments: property operations, development and fund management. GLP achieved strong leasing volumes, rent growth and higher fund fees in FY15. Development margins remained strong. In-line with our capital recycling strategy, GLP continues to evaluate opportunities to unlock value and maximize returns. This is being undertaken while maintaining a strong balance sheet.”

FY15 Group revenue was US$708 million, up 13% year-on-year. GLP’s core operations continued to deliver strong growth, with FY15 pro-forma earnings excluding revaluations up 31% year-on-year. China pro-forma earnings excluding revaluations grew by 33% year-on-year.

4Q FY15 Group revenue was US$167 million with earnings (PATMI) of US$105 million. Group earnings included one-off US$26 million of foreign exchange (“FX”) gains, a US$27 million revaluation loss in Brazil and US$6 million of transaction costs arising from the US acquisition. During the quarter, GLP’s average revenue yield in Brazil expanded 65 basis points to 10.0% on the back of interest rate hikes.

The Board has recommended the payment of an ordinary dividend of SGD 5.5 cents per ordinary share (US$200 million), an increase of 22% over last year’s dividend per share. The proposed dividend is subject to shareholders’ approval at the Annual General Meeting.
 

Operational Momentum Continues with Solid Customer Demand

Demand for GLP’s modern logistics facilities remained high, with strong leasing across all its markets. FY15 Group new and expansion leases increased 25% year-on-year to 3.7 million square meters (“sqm”) (40 million square feet (“sq ft”)).

China’s stabilized logistics portfolio lease ratio increased 170 basis points quarter-on-quarter to 91% on the back of record 4Q FY15 new and expansion leases of 1.2 million sqm (13 million sq ft). Demand was driven by fast moving consumer goods, retail, cold storage and e-commerce industries in China. FY15 China same-property net operating income (“NOI”) was up 7.0% year-on-year, with same-property rents up 5.4%.

GLP maintained high lease ratios in Japan (99%) and Brazil (97%), with 350,000 sqm (4 million sq ft) and 130,000 sqm (1 million sq ft) of new and expansion leases signed during the year, respectively. In Japan, cash rents on leases renewed during the year increased 1.6% on average. In Brazil, GLP’s rents are indexed to inflation and same-property rents increased 6.0% year-on-year in FY15.

GLP’s US portfolio is 92% leased as of 31 March 2015, with the ability to further increase occupancy to 94% in the near-term. GLP recorded 126,000 sqm (1.4 million sq ft) of new and expansion leases in the US, with an additional 128,000 sqm (1.4 million sq ft) of renewal leasing executed, since it acquired the portfolio on 27 February 2015. Net effective rents⁴ for leases signed during the quarter increased 11.8%.

China remains GLP’s largest market, representing 56% of GLP’s pro-forma⁵ net asset value as at 31 March 2015. Japan accounted for 22%, Brazil 6% and US would be 4% following the sell down of GLP’s stake in GLP US Income Partners I.
 

Development Pipeline Generating Strong Value Creation

In FY15, GLP generated US$183 million of value creation from development (“development gains”). The Group’s development pipeline over the next three years is expected to generate approximately US$1 billion⁶ of development gains (GLP share) and US$400 million⁷ of fees and promotes (GLP share).

Development of modern logistics facilities is one of GLP’s key engines of growth. In FY15, GLP started US$2.6 billion of developments (GLP share: 49%) across the Group, up 32% year-on-year. In the same period, the Group completed US$1.2 billion of developments (GLP share: 44%) across China, Japan and Brazil with an approximate value creation margin of 36%.

China remains GLP’s main growth market for development. During the year, GLP met its target of starting 3.3 million sqm (36 million sq ft) of new development projects in China with a total estimated development cost of US$1.64 billion. This translated into starting an average of approximately three new developments a week. Land supply in this market continues to tighten, however GLP has strategically positioned itself to expand land sourcing opportunities by teaming up with strategic partners. 21% of the 3.3 million sqm (35 million sq ft) of land acquired in China was attributable to China consortium investors. GLP’s land reserve stands at 12.1 million sqm (130 million sq ft) as of 31 March 2015, providing a significant pipeline for future developments.

Expansion demand from repeat customers drives our development plans. In China, JD.com, GLP’s largest customer at 3.7% of leased area, quadrupled its leased area over the past year and now leases across 10 cities with GLP.
 

Significant Growth in Fund Management Platform

GLP completed the acquisition of one of the largest logistics portfolios in the United States for US$8.0 billion⁸ in February 2015. GLP is in advanced negotiations to pare down its stake of GLP US Income Partners I from 55% to 10%. Investor demand is strong and the fund syndication process is in the final documentation phase, with GLP expecting to make an announcement on the new investors soon.

GLP’s fund management platform enables it to crystallize the embedded value of its development pipeline. In May, GLP completed the sale of GLP Kobe-Nishi to GLP J-REIT. The sale crystallizes a 38% development value creation margin within 14 months, with net levered property IRR of 128% before fees and promotes. GLP Kobe-Nishi is a development under GLP Japan Development Venture.

Fund management revenue in FY15 increased 59% year-on-year to US$108 million. This consists of asset and property management fees of US$49 million and development and acquisition fees of US$59 million.

Total fund management AUM as of 31 March 2015 was US$20.0 billion, up 80% year-on-year.

US$16.5 billion has been invested so far, with further fee earnings upside when the remaining US$3.5 billion of uncalled capital is deployed. Based on the AUM and fee structure of its existing fund platform, GLP could generate annual fund fees of US$150 million⁹.

Fund management is an important and growing part of GLP’s business. It provides capital to support sustainable long-term growth while enhancing GLP’s returns via fund management fees and promotes. GLP’s fund management platform is scalable and given the significant market opportunities and strong demand from capital partners, GLP expects to continue growing this platform.
 

Healthy Capital Base to Capitalize on Growth Opportunities

GLP’s financial position remains strong. Pro-forma[10] net debt to assets stands at 10% on a look through basis. With a strong balance sheet in place, GLP remains poised to capitalize on growth opportunities and selectively expand its footprint.

Since GLP operates in multiple countries and is exposed to different currencies, the Group believes that a natural hedge is the best means to hedge against its foreign exchange exposure. In 4Q FY15, the Group signed agreements for term loans totaling JPY40 billion (US$334 million), which served as a hedge to further reduce its long-term exposure in Japan.
 

Earnings Call/Webcast Information

A briefing for investors and analysts is scheduled for Thursday, 14 May 2015 at 9.00 am Singapore time. Please visit our website (ir.glprop.com) to access our webcast for the event. Questions may be submitted during the live webcast and 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 March 2015, GLP’s US$28 billion property portfolio encompasses 41 million square meters (441 million square feet) of logistics facilities across China, Japan, Brazil and the US.
 

GLP’s growth strategy is centered on being the best operator, creating value through developments and expanding its fund management platform. 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.
 

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).

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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 Stabilized logistics portfolio

² Potential fund fees based on assumptions including AUM and fee structure of GLP’s existing fund platform

³Pro-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 26 & 27 of GLP’s 4Q FY15 earnings presentation

⁴ Net effective rent refers to the estimated cash rent to be received over the lease term (including base rent and expense reimbursements) on an annualized basis

⁵ Assuming GLP’s ultimate 10% stake in GLP US Income Partners I

⁶ Estimated development gains based on US$8 billion of Group development completions (GLP share: 45%) at 25% value creation margin

⁷ Estimated fees and promotes based on AUM and fee/promote structure of GLP’s existing development funds Promotes assume all requisite triggers are satisfied and not discounted

⁸ Subject to post-closing adjustments

⁹ Potential fund fees based on assumptions including AUM and fee structure of GLP’s existing fund platform

¹⁰ Assuming GLP’s ultimate 10% stake in GLP US Income Partners I