This article is sponsored by GLP. It appeared in the Investing in Logistics and Distribution supplement with the February 2019 issue of PERE magazine.
GLP began operations in Asia in 2003 and now has assets across US, Europe and Brazil, with India the latest market to be added to its global portfolio in 2018. The company listed on the Singapore Stock Exchange in 2010 but delisted last year. Chief investment officer Alan Yang tells PERE how the company has expanded so rapidly and created specialist teams across global M&A, technology, rezoning and development of new asset classes to grow the business beyond developing warehouses.
PERE: GLP’s expansion in the past few years has been dramatic. How did this come about?
Alan Yang: From the beginning we could see the potential in logistics assets given three major drivers for the space globally. First, globalization; all our customers were beginning or enhancing their cross-border capabilities, whether it was from a supply chain standpoint or a distribution standpoint. So that meant increasing footprints for our customers and demand for logistics services and facilities globally.
Second, demographics; the millennial generation was becoming increasingly powerful from a consumption and purchasing standpoint, but also increasingly sophisticated and demanding consumers. This generation was also driving e-commerce innovation, which has now set the standard for all distribution and retail companies to try to meet.
The third trend was the implementation of technology into the supply chain. The earliest adopters were tech companies, but as more people realized this consumption dynamic relied on the supply chain, more and more innovation happened.
In 2014, we had the opportunity to acquire the IndCor business from Blackstone in an $8 billion transaction, which allowed us to establish a scalable platform in the US. Given our global, strategic and disciplined approach, we were able to drive the expansion and become the second largest landlord in US logistics within 12 months of entering the market.
The European expansion happened end of 2017 when we acquired the Gazeley platform and in under a year we roughly doubled our AUM to $7 billion. Then in 2018, we entered the Indian market through a strategic joint venture with IndoSpace. Our expansion has been fast, but it has also been methodical and grounded in global themes that are still driving the market.
PERE: Tell us about your entry into India and the potential you see in that market.
AY: In India, we see a big push from the government on infrastructure, which is critical for logistics, and rapidly growing purchasing power, along with tremendous growth in digital penetration. We think there’s going to be accelerated institutionalization for the logistics real estate sector in India, as multinational companies coming to India expect to see international standards. Our AUM in China is $20 billion today, and we think India could become as big as that over time. The two markets share many similarities – a large population, favorable demographics and rapidly developing e-commerce and organized retail channels driving demand for modern logistics infrastructure.
Partnering with IndoSpace is a strategic fit for us given they are the largest in the market, with a strong track record. We bring our DNA, in terms of being able to scale a business in any market, understand what’s driving customer demand and see where real estate should be strategically located. We also launched a venture with Everstone, one of the sponsors of IndoSpace, to invest $500 million in strategies and technologies to enhance logistics efficiency, to capture opportunities across the logistics value chain in India, including express delivery, smart trucks, telematics and robotics.
PERE: We see a lot of developed markets far into the late stage of cycles. How are you looking to add value and to make your returns in these markets?
AY: We pay very close attention to economic and business cycles. There are global cycles for sure, but there are nuances between each market and we target our efforts accordingly. So, in recent months we raised a third Japan development fund and a Continental European development venture, focusing on Germany, France, Italy, Spain, the Netherlands and Belgium. That shows how we think about each market and the opportunities in each one.
More importantly, those tailwinds – globalization, demographics and technology – are still driving warehouse demand, across markets and cycles. We see the line between technologically driven operating businesses and real estate is blurring. Consumer demand for e-commerce is growing much faster than the logistics infrastructure supporting it and for us the opportunity is to help bridge that gap with both technology and a global real estate footprint.
PERE: Technology is obviously important for you, both as a driver for the logistics market but also as another area where you have invested in specialist expertise. How do you see logistics real estate tech developing?
AY: Logistics real estate sits at the back end of the supply chain versus the consumer-facing side at the front. There is a technology gap between the front and the back end, which has to close in order to maintain the levels of service people are coming to expect. Roughly three years ago, we started to build specialist teams with domain expertise distinct from traditional real estate development to drive the expansion of our logistics platform and ecosystem. With that expertise and our global footprint and access, we’ve been able to identify the right technology and incubate it within our real estate portfolio in a way that gives those technologies more data points and customer feedback, and ultimately growing those businesses.
Just to give a couple of examples of technology which we’ve invested in that have really grown, one of which is G7, a trucking telematics company, which builds “boxes” that track detailed vehicle information and movements. This makes delivery more efficient, reliable and safer. There are almost a million trucks in China with this G7 technology now. And we’ve also been investing in robotics, on the picking and sortation side. Automating these processes improves speed, efficiency and accuracy, and paired with sensors creates more knowledge about inventory. So the technology is about making sure the trucks are full, taking the right route, and being as fast as possible with it. There is a strategic link between our traditional core logistics business and what technology innovators are doing, which ultimately makes our warehouses the most efficient they can possibly be for the customer.