GLP signals fund management growth with $2.6bn J-REIT exit

The Singapore-listed, Asia logistics giant is planning the launch of a J-REIT with a view to exiting almost half of its entire Japanese portfolio.

Global Logistic Properties (GLP), the Asia-focused logistics real estate developer spawned from Asia business of ProLogis, is plotting a milestone event aimed partly at growing out a fund management business in Japan.

GLP announced it is planning to place almost half of the wholly-owned properties from its Japanese portfolio into a J-REIT in a transaction that could be worth ¥209 billion (€2 billion; $2.6 billion).

The firm said the placing of the assets into a J-REIT was in line with its strategy of recycling capital partly in order to grow its fund management platform in the country. The firm expects to make net proceeds of ¥100 billion which would be reinvested in Japan and also in China.

Jeff Schwartz, deputy chairman of GLP, said: “This is a very significant transaction for GLP. It is consistent with several elements of our strategy, recycling capital to fund expansion in high-growth markets and growing our strong fund management platform.”

GLP expects to place 30 properties from its 68-strong, wholly-owned Japanese property portfolio, into the J-REIT to create its initial portfolio. Following that, GLP said it would grant options exercisable for approximately three years, to the J-REIT to acquire another three wholly-owned properties. Furthermore, the J-REIT would have a “right of first look” over the remaining 38 wholly-owned properties.

While GLP would be relinquishing direct receipt of about 26.5 percent of its consolidated net profits, it would be retained as asset manager of the properties, earning fees from that function. It would also retain a stake in the vehicle.

The listing of a J-REIT comes at a relatively buoyant and bullish time for the sector. According to October figures from the Association for Real Estate Securitisation (ARES), Japan’s 35 J-REITs produced a total return of 16.3 percent. In addition, they made 44 investments in the month while divesting just twice.

The sector has benefited from a ¥80 trillion, country-wide asset purchasing scheme by the Bank of Japan following the global financial crisis. While J-REIT capital set aside represents a relatively paltry ¥120 billion, ARES reported it remained committed to buying from J-REITs in need until the end of next year. The BoJ has purchased ¥96.9 billion in J-REIT stock as of the end of September 2012.

The company has made building its fund management relationships with global institutional partners something of a priority of late. The announcement of a sale of assets via a J-REIT by GLP comes one month after it sold a 16.7 percent stake of a jointly-owned portfolio of properties, predominantly in Tokyo, to the multi-manager division of CBRE Global Investors for ¥7.6 billion. That portfolio is held jointly with China Investment Corporation, the sovereign wealth fund, also.

In September 2011 GLP formed another partnership in Japan with the Canada Pension Plan Investment Board called Japan Development Fund.

GLP was formed in early 2009. Backed by the Government of Singapore Investment Corporation, former ProLogis chief executive officer and chairman Jeff Schwartz led the purchase of large parts of the global logistics giant’s Japan and China portfolios. Initially held privately, the company was listed on the Singapore Stock Exchange in October 2010.