The reach of logistics developer and investment management giant Global Logistic Properties in China has been extended further with the formation of a large scale joint venture with Chinese logistics facilities provider China Materials Storage and Transportation Development Company (CMSTD).
GLP announced it has agreed to invest $324 million for a 15.3 percent stake in Shanghai-listed CMSTD, becoming its second largest shareholder in the process, in a deal that will grant it exclusive access to the firm’s future logistics development projects in China. The sale price values the shares at a 10 percent discount to the last transacted price of CMSTD’s shares on 25 July. The deal is subject to regulatory authorities and approval from CMSTD shareholders, expected next month.
If successful, it should close in early 2015. Funds from GLP will come from its Chinese investor consortium, which was formed in February and which sees GLP benefit from $2.5 billion of equity committed by Chinese institutions.
GLP said CMSTD has a land bank and portfolio of logistics properties that extends to more than 100 million square feet. The firm, led by logistics property veterans Jeff Schwartz and Ming Mei, said the transaction would “boost GLP’s development pace in China and enhance its network effect”.
GLP already controls the largest institutional-grade logistics property portfolio in China, dwarfing those of its international competitors in the market. The firm’s completed portfolio, for example, extends to beyond 61 million square feet. ProLogis, one of its closest rivals, on the other hand, said in its latest annual report that it controlled 9.7 million square feet of completed property.
Under the terms of the agreement, GLP would hold a 49 percent stake in the joint venture, with the remaining 51 percent held by CMSTD. However, GLP has the option to increase its position by 1 percent to make it an equal 50:50.
Initially, the venture is expected to invest $583 million to develop a pipeline of 14 million square feet across China from CMSTD’s land bank. Then, looking forward, the venture would have the right of first look for all future logistics land sourced by CMSTD for the purposes of developing logistics facilities.GLP has also secured the priority right to redevelop CMSTD’s existing logistics facilities.
Mei said of the investment and venture: “This transaction is highly strategic and mutually beneficial, with GLP being able to leverage CMSTD’s strong land sourcing capabilities and CMSTD having the opportunity to tap into GLP’s expertise in developing and managing modern logistics facilities. In addition, access to CMSTD’s portfolio of strategically-located logistics assets will further enhance our ‘network effect’ enabling us to better serve our customers across China.”