GLP breaks into infrastructure with $2bn China solar JV

The global real estate firm has teamed up with Brookfield Asset Management for a 50:50 venture expected to be China’s biggest provider of rooftop solar renewable energy.

GLP, the real estate investment management business best known for the development and funding of large logistics real estate projects, has made a significant step in its plans to diversify into other sectors by launching a joint venture business aimed at providing solar panels across China.

The firm has teamed up with Toronto-based real assets investment manager Brookfield Asset Management to invest in a solar energy business that is expected to be the biggest provider of rooftop solar renewable energy in the country.

Following about two months of talks, the partners have agreed to commit as much as $2 billion to the venture over the next five years to pay for the roll-out of the panels. Ming Mei, co-founder and chief executive officer of GLP, told PERE: “Once the business has reached a meaningful scale, we’ll bring in third-party investors. The first rights will go to existing investors but we’ll also bring in new investors, too.”

In terms of returns, the firm is expecting a “mid-double digit IRR” from the venture.

Mei said the venture was part of a broader strategy to “build a logistics ecosystem that can help our customers. As part of our infrastructure, we want to leverage the rooftops we have by installing solar panels.”

Mei explained that an initial plan to drive value from GLP’s assets for its customers and investors also had benefits for the Chinese cities where the firm will install the panels as it will also develop charging stations for distribution trucks to use as they engage in the last-mile delivery of goods.

The plan in numbers:

1.1m – solar panels to be installed

300m – kWh of electricity per year generated,

enough to power 200,000 homes 

3 years – time it will take to install

$2bn – shared cost over 5 years 

GLP will initially develop 1.1 million solar panels to be installed over the coming three years, which should generate 300 million kWh of electricity per year, enough to power about 200,000 homes. The firm could more than triple that number within five years.

For that, Mei said only approximately 10 percent of GLP’s China portfolio would be used. As of last month, the firm’s portfolio in the country comprised 203 million square feet of completed logistics space and 115 million square feet of development pipeline. GLP has a further 134 million square feet in land reserves. “In five years, we’ll probably cover more than 20 percent of our rooftops. It’s a conservative plan from us and there’s a lot of room to grow,” he said.

One area of growth will be for the venture to include the installation of solar panels to rooftops not owned by GLP, Mei added.

GLP already has approximately $100 million of solar panels on its rooftops in Japan, however Mei said the was no current plan for the venture to invest in that country. On expanding the business geographically, he said: “We’re limited to China at this point. Other markets remain open. For those we may decide to do JVs or to go ourselves. That’s not decided yet.”

In partnering with Brookfield, GLP has teamed up with a firm with a more institutionalized exposure to energy investments, including solar, in which it is the owner and operator of more than 13,500 MW of utility-scale plants located around the world. Last year, Brookfield acquired a 51 percent stake in TerraForm Power, a publicly-traded renewable power company with 2,600 MW of wind, solar and distributed generation assets predominantly in the US. Mei said: “Brookfield has a large presence in renewable energy and the chemistry between the two firms is right.”

GLP’s expansion from being a pure-play logistics real estate investment manager into a more diversified business is expected to continue this year with the launch of a private equity platform aimed at making technology investments in the logistics ecosystem.

It is this drive into other sectors which is behind the firm shortening its name from the long-hand Global Logistic Properties to the acronym GLP.

Ming Mei was interviewed on stage at PERE’s Asia Summit in Hong Kong earlier this month.