China’s sovereign wealth fund China Investment Corporation (CIC) has bolstered Singapore-listed logistics giant Global Logistic Properties’ (GLP) acquisition of one of the largest Japanese logistics portfolios to have ever changed hands.
It was announced today that, via a 50:50 joint venture entity called Light Year, CIC and GLP have purchased a portfolio of 15 logistics warehouses in the greater Tokyo and Osaka areas from a fund managed by Chicago-based real estate investment management firm LaSalle Investment Management for $1.6 billion.
CIC and GLP, investing together for the first time, have each committed $272.9 million of equity to the transaction which is expected to complete in the first quarter next year. The remaining capital comes in the form of debt financing from a group of unnamed Japanese banks.
The portfolio comprises more than 8 million square feet of logistics space which is 98.3 percent occupied with a weighted average lease expiry of 5.6 years. The majority of tenants are third-party logistics providers and e-commerce occupiers.
GLP said in its announcement the acquisition from LaSalle would develop its fund management platform and provides a second example in close succession of forming joint ventures with the world’s largest state investors. In September, GLP teamed up with Canada Pension Plan Investment Board for a $500 million joint venture fund aimed at investing in the development of multi-tenanted and build-to-suit properties, also in and around Tokyo and Osaka.
That deal and the acquisition from LaSalle will further enhance GLP, itself significantly backed by a state investor in Government of Singapore Investment Corporation, as Japan’s largest logistics landlord. Assuming the deal complets, the firm will manage 38.7 million square feet of logistics in the country compared to closest rival ProLogis with 27.9 million square feet, according to GLP’s own research.
Jeffrey Schwartz, deputy chairman of GLP and the former head of ProLogis, said: “The transaction will be accretive to GLP from day one. The equity portion of this transaction represents less than one year of our operating cash flow created by our current Japanese operations.”
“GLP and CIC are only acquiring the assets that met our investment criteria,” Schwartz added. The assets represent all but two of those from LaSalle’s first Japan logistics fund, called Japan Logistics Fund.
For LaSalle’s part, the sale at the same valuation as its August 2010 valuation for the entire fund, represents something of a full-circling of investments for the vehicle. Yasuo Nakashima, chief executive officer for LaSalle in Japan described the sale as enabling the firm to get closer “to round-tripping one of the region’s first warehouse investment vehicles for institutional investors.” He said the sale generated “such strong returns” for the fund’s investors.
He also reiterated LaSalle’s keenness to continue investing in Japanese logistics, a sector singled out at PERE’s Asia roundtable in October as being particularly attractive to international investment houses currently, partly in spite of and partly because of March’s Fukushima earthquake and tsunami. Yasuo added: “Our success with Japan Logistics Fund is testament to our original investment thesis – one which saw the Fund through a number of storms, including the Global Financial Crisis, the European Credit Crisis, and the very real challenges we endured during and after the Japan earthquake and tsunami.”
LaSalle’s Japan Logistics Fund was closed in 2004 on just shy of $400 million of equity in commitments from 14 investors. It is believed that, on completion of the sale, LaSalle would start marketing a third Japanese logistics fund to follow-up 2007’s LaSalle Japan Logistics Fund II, which closed on $1.15 billion of equity from 27 investors.
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