GLP

GLP: has successfully completed its IPO of GLP J-REIT (3281 JP) on Tokyo Stock Exchange, which debuts today. GLP is contributing 30 of its properties to the J-REIT for an initial consideration of US$2.6b, making GLP J-REIT the largest logistics REIT in Japan. The sale of assets is expected to be completed on 4 Jan ’13. Net cash proceeds from the sale are est to be ~US$1b, which GLP intends to use primarily for invmt in China, Japan and other countries. GLP J-REIT completed an IPO of 1.83m units, comprising 57.5% / 42.5% domestic/ int’l offering. GLP continues to hold ~15.75% in GLP J-REIT. GLP J-REIT’s offer price at ¥60,500 compares with the last done at ¥62,600, +3.5%, at 8.35am. Of note, GLP J-REIT would be the first Japanese REIT to bolster the shareholder payout with money that its peers usually set aside to cover depreciation expenses. The REIT’s yield will rise to 6.8% from 6% with the inclusion of 30% of the depreciation for the warehouses it manages, according to GLP’s forecast. The average dividend yield for the Tokyo Stock Exchange REIT Index is 4.7%. GLP J-REIT seeks to compete with Singapore and HK REITs, which on avg pay ~100% of funds from operations, compared with ~ 65% for J-REITs, based on an estimate by CBRE Clarion Securities. Even though Japanese regulation allows J-REITs to pay as much as 60% of epreciation, no REITs in Japan have done so, partly because of concerns that they may not be able to cover renovations or other expenses. Most other J-REITs are awaiting to see the market’s reaction to GLP J-REIT, before deciding if any changes need to be made to their distribution policy. Japan’s REIT Index has gained 31% this year and is set for its biggest gain since at least 2004. The Bank of Japan, the central bank, has been buying the REITs since 2010 as part of a ¥76 tr (US$904.5b) asset fund to support the economy. The central bank has acquired 85% of the ¥130b in J-REITs it plans to buy by the end of 2013.