GLP

GLP: is planning to raise ¥209b (US$2.6b) from the sale of its Japanese warehouses to a REIT that it will partly own and manage. GLP will sell 30 of its 68 Japanese logistic facilities to the J-REIT, and allow the REIT to buy an additional 3 properties over the next 3 years. The REIT will be granted a “right of first look” over the remaining 38 properties for a period of 10 years. The purchase consideration for the initial portfolio represents a 0.03% over the end-Jun 2012 book value. The purchase consideration for the 3 three assets covered by the 3-year options is fixed at ¥12.6b, which represents a 1.04% premium over the end-June 2012 book value. An IPO for the property trust would be the biggest this year in Japan nation after the US$8.4b share sale by Japan Airlines. A stock offering will be the largest by a REIT in Japan since Nippon Commercial Investment Corp raised ¥121b in 2006. The sale will help in GLP’s strategy of recycling capital to fund expansion in high-growth markets and growing its strong fund management platform. It monetizes a considerable proportion of GLP’s portfolio and will generate stable recurring income for the group, diversifying its earnings base. GLP is expected to unlock an estimated net US$1.3b from the sale of the initial portfolio to the REIT. GLP intends to use US$0.2b of the proceeds to subscribe for a stake in the REIT and the remaining US$1.1b for projects in China, Japan and other markets. Nomura believes the market has anticipated this announcement to a large extent; notes while the initial portfolio to be monetised is bigger than expected (~US$2b), the premium is more modest compared to expectation of ~4.8%. The house, which has a Neutral rating, has already ascribed a 5% premium to its NAV of $2.66 to derive its TP of $2.80 to reflect the potential accretion from any asset monetisation exercise. Says its numbers are now under review following this announcement. CIMB keeps at Neutral, says GLP’s stellar rally ytd suggests that the positives may be priced in, but raises TP to $2.55 from $2.48.