Global Logistic Properties (GLP) is raising its first China-focused real estate fund, GLP China Logistics Fund I, with a target of as much as $1.5 billion. Unlike its previous fundraisings, which were structured as joint ventures or club deals, GLP’s latest offering appears to be more similar to a traditional commingled fund, albeit one where the firm is contributing a substantial portion of the vehicle’s capital.
Indeed, with its new China fund, GLP is making its largest co-investment in one of its funds to date, committing $750 million, or 51 percent of the total capital target for the vehicle. The commitment also amounts to approximately 42 percent of the firm’s cash assets as of June 30, according to a document from the New Jersey Division of Investment (DOI), which agreed to invest $75 million in the fund at its board meeting last week.
New Jersey, which will pay a management fee of 0.6 percent on its investment, will make up between 5 percent and 6.25 percent of the fund. In contrast, GLP’s other investors – which principally have comprised the Government of Singapore Investment Corporation, the Canadian Pension Plan Investment Board and China Investment Corporation – have contributed anywhere from 11.9 percent to 50 percent of the equity in its previous capital raises. The firm previously raised two Japan-focused vehicles, GLP Japan Development Partners I and GLP Japan Income Partners I, and two Brazilian funds, GLP Brazil Income Partners I and GLP Brazil Development Partners I.
In all, GLP's China fund had six institutional investors at the time of its closing, but GLP declined to name any of the investors. However, PERE has also learned that the Korea Investment Corporation, South Korea's $57 billion sovereign wealth fund, committed $500 million to the vehicle.
GLP China Logistics Fund I would target the development of Class A industrial real estate assets throughout mainland China. “The fund presents an opportunity to develop modern logistic facilities at attractive yields where a lack of supply exists in China’s key markets,” the pension plan noted in a report to the New Jersey State Investment Council, which oversees the DOI’s investments.
Because of its lack of modern industrial space, high barriers to entry and an increasingly sophisticated customer base that views more than 75 percent of the current supply as obsolete, development yields in China currently are projected at 8.75 percent, with an unlevered internal rate of return of 14 percent for a 10-year holding period. By comparison, development yields for other property types in the country and industrial real estate in the US and Europe are closer to 6 percent to 7.5 percent.
The fund currently has an investment pipeline of approximately 22 projects and 1.7 million square meters (1.82 million square feet), primarily in the form of land to be developed. The vehicle also could benefit from the firm’s development pipeline of 6.8 million square meters under contract.
GLP, which has hired M3 Capital Partners as placement agent for the capital raise, is the largest logistics property developer, owner and operator in China, with five times the gross floor area of its closest competitor in the country. One of its newest ventures in the country is the development of 130,000 square meters (1.4 million square feet) of new built-to-suit facilities at GLP Park Dianshanhu II in Kunshan, eastern China, on behalf of Chinese e-commerce company Vipshop.
Co-founded in 2009 by Jeffrey Schwartz, former chief executive of Prologis, and Ming Mei, former chief executive of Prologis China, GLP currently manages $16.4 billion of real estate assets across China, Japan and Brazil. The firm’s Chinese property portfolio encompasses 21.4 million square meters (230 million square feet) across 66 cities.