Global Logistic Properties (GLP) has raised $3.7 billion for its new China logistics fund, the Singapore-based property developer said.
Its AUM is set to rise to $27.1 billion, reflecting the company’s continued expansion into fund management.
Yesterday the developer announced that $3.7 billion had been committed to its China Logistics Fund II (CLF II) by six sovereign wealth funds and public pension funds, one Asia-based financial institution as well as GLP itself.
Raising third-party capital for expansion was preferable to issuing new equity, said GLP chief executive Ming Mei. GLP has a 56% stake in CLF II.
At the same time, Mei cited operational experience as a key factor attracting investors to the fund. “Competition is intense but shows who is a true operator and who is [just] an investor,” said Mei, highlighting GLP’s model of developing, operating and syndicating real estate assets.
CLF II will increase GLP’s fund management AUM by $7 billion, including leverage. That increase comes in the wake of an $8 billion rise in February this year on completion of a US acquisition.
Combined, the two portfolios will see GLP’s fund management AUM surge by 125%. Fund management fees grew from $34 million in the fiscal year ending March 2013 to $108 million in fiscal year 2015. The company is aiming for a further 60% rise in the fiscal year to end-March 2016.
Asia-based institutional investors account for four of the six institutional investors in CLF II, including two from China and one based in Japan, said Mei. The other two institutional investors are based in the Middle East and North America.
Mei declined to name the investors in CLF II but did disclose that the fund had attracted two new investors to GLP’s fund management platform, both based in Asia.
Existing investors in GLP’s fund management platform include the Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC.
GLP also attracted one new institutional investor – also based in Asia – to its fund management platform with the sale of a 45% stake in GLP US Income Partners I, which was announced in May but is still awaiting regulatory approvals.
GLP US Income Partners I is the US logistics portfolio that GLP and GIC acquired from PE firm Blackstone earlier this year. GLP itself was formed when GIC Real Estate acquired US logistics firm Prologis’ China and Japan operations in 2009.
The CLF II fundraising has highlighted confidence in China’s consumption growth, despite recent stock market turmoil. Mei sees a “temporary psychological impact” of recent stock market volatility “on discretionary-type shopping” on “expensive things” like cars and holidays but not day-to-day consumer spending in China.
“80% of our business is targeted at daily necessity consumption,” said Mei. Rapid growth is expected from demand for cold storage. Retail/fast food chain logistics account for the largest share (33%) of GLP’s existing leased area in China, compared to 15% for GLP’s US portfolio. E-commerce accounts for 24% in China compared to 9% in the US.
At the end of March 2015 – GLP’s fiscal year – GLP’s China portfolio was more than 11.8 million square metres, compared to GLP US Income Partners I’s 11 million square-metre portfolio. CLF II will add a further 13 million square metres to GLP’s China portfolio over the next four years.
CLF II assumes the title of the largest China-focused logistics infrastructure fund from CLF I – GLP’s $3 billion eight-year fund (including $1.53 billion equity with $855 million contributed by GLP) which was raised in March 2013 and has already invested more than $1.4 billion. CLF I is expected to be fully leveraged and invested by March 2017. The seven-year CLF II is scheduled to be fully leveraged and invested by March 2020.
Four of the six investors in CLF I have also invested in CLF II. Mei declined to say why the other two investors in CLF I had not invested in CLF II but pointed to concentration limits and the requirement to exit a first fund before investing in a second as typical reasons for not reinvesting.
He said that CLF I’s track record and ability to execute had attracted investors to CLF II. News reports of investments in China logistics “probably add up to a trillion” said Mei, but the “amount executed on the ground is not that much”. CLF II is targeting returns in the "mid-teens," Mei said.