Global Logistics Properties (GLP) is up 1.6% to $2.59 in a tepid trading session after announcing the establishment of a second China-focused logistics infrastructure fund, CLF II, together with seven other institutions.
Together, GLP (56% stake) and its partners will be committing US$3.7b of equity into the fund, with debt financing allowing the fund to lever up to US$7b investment size, enabling it to develop 13m sqm of logistics properties over four years.
In addition, GLP anticipates that fees earned on capital will enhance its returns by 400-500 bps.
CLF II is more than double the size of GLP’s first China development fund, which has reached its investment target of US$3b. Over the last ten years, GLP has seen its China portfolio achieve 61% CAGR, currently boasting 11.8m sqm of completed facilities.
With the new fund, GLP’s fund management platform will expand 36% to US$27.1b. GLP expects the fund to start acquiring land for development later this year with construction to commence in Apr 2016.
The rationale for the development fund is to capture the significant opportunities arising from demand for modern warehouse facilities, which is being driven by growing domestic consumption, urbanisation, and the growth in e-commerce.
At current prices, GLP is trading at 1x P/B and 22% discount to RNAV/share of $3.30. The street has overwhelming 17 Buys and 1 Hold ratings on the logistics play with a TP of $3.21.