GLP will take its first step into Europe with the acquisition of logistics platform Gazeley for $2.8 billion as the logistics developer continues to aggressively expand its global property portfolio while itself awaiting shareholder approval for a $11.6 billion takeover by a consortium of Chinese investors.
The Gazeley portfolio will be injected into the Singapore-based company’s fund management platform and is a result of rising investor demand to partner with GLP in the European logistics market.
“We have been looking to expand to Europe and this portfolio presents an attractive entry point given the quality and location of the assets,” said Ming Mei, GLP co-founder and chief executive officer of GLP. “This transaction adds a premier operational and development platform for us in Europe and is part of our long-term strategy to expand our fund management business.”
The 32 million square feet acquisition portfolio is concentrated in Europe’s key logistics markets, namely the United Kingdom (57 percent), Germany (25 percent), France (14 percent), and the Netherlands (4 percent). It comprises 17 million square feet of existing assets, which are 98 percent leased with a weighted lease expiry of 9 years, and a development pipeline of 16 million square feet of buildable area.
About 60 percent of existing assets have been built within the last five years and 85 percent of the development pipeline is focused in the United Kingdom, one of Europe’s most land-constrained markets, GLP said in a statement.
The company said the macro environment in Europe was compelling, with falling unemployment, record low vacancies at logistics properties and huge growth in the continent’s e-commerce business. This improving economic climate was supported by data provided by IHS Markit chief international economist Elisabeth Waelbroeck-Rocha, who told the JOC’s Container Trade Europe conference in Hambuurg recently that Eurozone economic sentiment was at a 10-year high and would continue its slow but steady growth.
The Gazeley transaction is expected to be funded by $1.6 billion of equity and $1.2 billion of long-term, low-cost debt. GLP will fund its equity commitment with cash on hand, existing credit facilities and new indebtedness.
The acquisition is supported by the the Chinese consortium known as Nesta Investment Holdings and the deal will not affect its planned takeover of GLP. Nesta comprises Hopu, Hillhouse Capital, Bank of China Group Investment, Vanke, and SMG, a company owned by the GLP chief executive. If Nesta’s highly attractive bid for GLP is accepted by shareholders it will be completed on or before April 14, 2018.
The premium price offering of $2.46 per share represents a 64 percent increase over the last undisturbed share price at November 2016 when the strategic review was announced; a 67 increase over the one-month volume weighted average price per share; a 72 percent increase over the three-month weighted average per share; and a 81 percent over the 12-month weighted average per share.
GLP owns and operates a global portfolio worth $41 billion with 592 million square feet of logistics properties in China, Japan, Brazil, and the United States. It doubled its sizeable US footprint with the December 2016 acquisition of Hillwood Development Company and its $1.1 billion logistics portfolio.
However, the major business opportunites are coming from China, where GLP is the market leader and has been growing its warehouse development in the country by 30 percent per year. GLP and a consortium of investors in mid-2015 established a $7 billion China-focused logistics infrastructure fund known as CLF II aimed at developing modern warehouse facilities across the mainland.
GLP China manages the fund with a 56 percent interest, and its partners will include national pension funds and sovereign wealth funds from Asia, North America, and the Middle East. One of the key drivers in China was the rapid growth of organized retail that, over the past year, has shown compound annual growth of 52 percent. Much of this demand was from fast-moving consumer goods, retail, e-commerce, and auto parts.
With growth in China’s logistics warehouse sector still in its early stages, and domestic consumption and organized retail growing, GLP expects to continue expanding, focusing on locations with strong demand and limited land supply, such as Beijing, Shanghai, Guangzhou, Shenzhen, and Suzhou. In 2016 these cities comprised almost 60 percent of GLP’s portfolio and around 40 percent of developments in its pipeline.