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GLP adds US$1.1 billion of logistics assets to US portfolio
GLOBAL Logistic Properties (GLP) is acquiring US$1.1 billion of logistics assets in the US - just a year after snaring US$4.55 billion of industrial assets there.
The mainboard-listed group said on Tuesday that it had entered into a definitive agreement to buy the logistics assets from Dallas-based developer Hillwood Development Company LLC.
The properties, which span 15 million square feet (1.4 million square metres), not only extends GLP's US footprint significantly but is also "immediately accretive".
The company said: "Investor demand to partner with GLP in the US logistics market is strong."
It expects to syndicate a pool of capital partners by the initial closing for the first US$700 million worth of completed assets by December.
The remaining US$400 million of the portfolio are assets under development that will be acquired in phases upon completion and full lease-up.
GLP expects to retain a 10 per cent stake in the portfolio post-syndication and manage the assets.
The entire transaction is expected to be funded by US$470 million of equity and US$635 million of debt. The 12-year fixed-rate loan at 3.5 per cent for the initial closing locks in attractive returns for GLP.
Based on GLP's equity share of US$47 million in the portfolio, it is expected to generate a 13 per cent return on equity (including fees) in the first year of investment.
"This transaction, which will be immediately accretive to GLP, demonstrates our ability to leverage our existing platform to pursue enhanced network benefits in the strongest US markets," said Chuck Sullivan, president and chief operating officer of GLP US.
The deal also strengthens GLP's position as the second-largest owner and operator of logistics facilities in the US with no additional overheads.
The 15 million sq ft portfolio has a strong concentration in desirable locations expected to ride the growth of e-commerce in the US, GLP said on Tuesday. Some of these properties are located in Los Angeles, Atlanta, Chicago and Indianapolis.
Upon completion of the acquisition, GLP's US footprint will increase by 9 per cent to 187 million sq ft (17 million sq m) , with the US making up 8 per cent of GLP's net asset value.
This latest buy follows GLP's acquisition of a US$4.55 billion portfolio of industrial assets in the US last year - a portfolio in which it has pared its equity stake down to 9.85 per cent as at last week after a series of syndications.
Backed by its single-largest shareholder GIC, GLP is the largest logistics property owner and operator in China, Japan and Brazil, and the second largest in the US; its logistics facilities span a total 52 million sq m as at June 30.
Explaining its expansion trail in the US, GLP noted that industrial property supply still remains well below historical levels, with the supply in 2015 satisfying less than two-thirds of demand amid significant growth in e-commerce.
The US$1.1 billion portfolio is being acquired at a going-in cap rate of 5.7 per cent. Some 80 per cent of customers for the US$700 million completed portfolio from Hillwood are investment-grade credit or public companies. The weighted average lease expiry of the US$700 million of completed properties is nine years.
To mitigate lease-up risk of the US$400 million development portfolio, the acquisition entails a set of stringent lease-up metrics that lock in long-term tenants.
On Monday, GLP also announced that it is developing a 27,000 sq m modern logistics property in Osaka at a development cost of around five billion yen (S$66.8 million).
Located some 14 km from Osaka City Centre, GLP Neyagawa is a project under GLP Japan Development Venture II, a 50-50 joint venture between GLP and the Canada Pension Plan Investment Board. The development is slated for completion in the first quarter of FY19 (April to June 2018).
Shares of GLP closed four cents lower at S$1.82 on Tuesday.