He could have been negotiating the track’s various mountain passes, boardwalks and suspension bridges earlier, if a consortium of investors he was leading had lost its bid to privatize the business he set up almost a decade ago. But a grueling 18-month process, culminating in victory for the consortium last July, meant he kept the reins and the trip has had to wait.
Since then, Mei has been engaged in realizing a post-privatization vision for GLP, one in which the firm morphs from a singular proposition – funder and developer of logistics real estate – into a multi-pronged offering also investing in other logistics-relevant businesses, or “adjacencies” as he terms them.
When Mei formed Global Logistic Properties alongside his mentor, the late industrial property veteran Jeff Schwartz, via their $1.3 billion purchase of Chinese and Japanese assets from rival Prologis in 2009, the focus was squarely on expanding the property portfolio.
Fast forward nine years, three regional expansions and plenty of organic growth and the company has ballooned from around 65 million square feet of completed real estate under management in those two markets on day one to almost 460 million square feet today across Asia, the US, Europe and Brazil. Expanding the global footprint is still very much a priority, but nowadays so is generating value from offering logistics services as well logistics accommodation.
“I don’t want the name to define the business, but the business to define itself. When we talk about GLP now, people picture warehouses. Hopefully, five years from now, GLP will equal something else.” – Ming Mei
Early indicators of GLP 2.0 are already visible. In March, the firm formed a $2 billion joint venture with Brookfield Asset Management to install solar panels on about 20 million square feet – roughly 10 percent – of its Chinese rooftops from which tenants can benefit from renewable energy supplies. And before the summer is through, it is expected to have closed on $1.5 billion for a private equity fund to develop logistics-related technologies aimed at helping its occupier base make their distribution operations more efficient. Mei no longer sees GLP as a landlord only but as the provider of a “logistics ecosystem,” a one-stop-shop from which his customers, including the likes of e-tailing behemoth Amazon, delivery giant DHL and sports major Adidas, can meet their entire distribution needs.
Accordingly, the long-hand name Global Logistic Properties has become the acronym GLP. “That’s exactly why I changed it,” he says. “I don’t want the name to define the business, but the business to define itself. When we talk about GLP now, people picture warehouses. Hopefully, five years from now, GLP will equal something else.”
It is to explain this leg of GLP’s journey that he is in Hong Kong as one of the keynotes of PERE’s biggest conference, the over-500 delegate annual Asia summit. Released from the gagging that goes with a privatization process, Mei has also used the trip to walk PERE through the seminal deal as well as regale a number of personal career insights, some for the first time.
Mei, 45, is an intensely private person and, for years, was happy to let Schwartz represent the firm. But after the 55-year-old American died in 2014, and with the firm’s growth picking up pace, Mei believes more public speaking is a responsibility he must now bear. “I’ve always said I want to keep a private life where I can wear flip-flops, go sit at a street vendor, spend time with the kids and nobody knows who I am. Also, Jeff was very good at public speaking. But now we’re close to being a $50 billion AUM business, it’s my duty to let our partners and shareholders understand what we’re about, our strategy and our intentions.”
Mei has plenty of work ahead if his vision for GLP is to be realized. But whether mindful of the limited vacations he has had since starting work for his family at just 13, or of the fact his 30-year career has taken its toll physically, he is determined to take some time off. Indeed, had the consortium been unsuccessful in taking GLP private, he would have disappeared on a six-month sabbatical. Regardless, Milford Track is booked, as is Nakasendo Way, another popular route from Kyoto to Tokyo, for later this year. “I’ve never had a break in my life,” he says. “So I told myself if we won, I’d still take two weeks.”
Mei admits to feeling exhausted when the privatization bid was finally approved last November. Following a strategic review instigated at the start of 2016 by GLP’s majority shareholder, the Singapore sovereign wealth fund GIC, his consortium purchased the company for S$3.38 ($2.58; €2.09) per share, reflecting a price of $11.6 billion. It was the second biggest logistics deal of all time, property deal of 2017 and one of the biggest property deals since the global financial crisis.
“I recused myself from the process. None of the investors that backed me had any information that wasn’t public. I didn’t even share with them my future intentions or growth assumptions. Nothing.” – Ming Mei
The consortium comprised a who’s who of investors, including some of Asia’s most prominent entrepreneurs. Including Mei’s own investment business, there were five manager-led groups of investors participating, including heavyweight private equity firms Hopu Investments and Hillhouse Capital Group, state bank Bank of China Group Investment and property company Vanke. Their investment broadens a GLP investor base that includes Hong Kong’s de facto central bank Hong Kong Monetary Authority, Chinese state fund, China Investment Corporation, Canada Pension Plan Investment Board, the Canadian pension manager, and Temasek, another Singaporean sovereign wealth fund.
Beyond being a test of endurance for Mei, the auction was also met with accusations of being uncompetitive relating to a perception of Mei benefiting unfairly from an insider advantage. This prompted US private equity businesses in particular to withdraw from bidding, the Financial Times reported. One unnamed private equity executive told the newspaper the process was “a farce,” “unprofessional” and involved “no fair play.”
The FT added how the only rival bidder at the end of the auction, a consortium including another private equity firm Warburg Pincus and one of GLP’s Asia logistics rivals e-Shang Redwood, also considered withdrawing. Ultimately, it did not.
Familiar with the complaint, Mei emphasizes he steered clear of both board discussions on the process and those of a special committee established to ensure the sale was conducted fairly. “I recused myself from the process. None of the investors that backed me had any information that wasn’t public. I didn’t even share with them my future intentions or growth assumptions. Nothing.”
Clearing the market
Perhaps predictably, Mei’s backers likewise insist the auction was run fairly. “Everytime there are losers in auctions, things will be said here and there,” says Hillhouse founder Zhang Lei. “The board and committee were clear. It was a lengthy process and a fair process.”
Of the private equity rival bidders, he adds: “They are all reputable firms with their own considerations. They decide what they want and at what price. For me, it was a fair price and a good price for the shareholders. It cleared the market.”
Clara Chan, head of direct investment at the HKMA, believes a degree of media scrutiny of the deal was to be expected, but concurs the process was fair. “The process was run by GIC and they take their reputation very seriously. They deferred the bidding timeline a number of times to make sure the private equity firms which complained would have the time to put together their bids.”
Chan says, like GIC, reputational risk is a key consideration for the HKMA, too: “If we had even tiny skepticism the process was not fairly run, that it would be susceptible to a judicial review or court process, no matter how good the underwriting, we would not have participated in the deal.”
Nevertheless, the whole experience left its mark on the GLP founder. Mei recalls the weight of expectation that came with leading so many sizeable and prolific investment houses in a deal of such magnitude and the stress of enduring such a lengthy process. He admits it was, at times, distracting, too. He remembers his young son expressing concerns: “I remember telling him, but also myself, that everything was going to be fine. He could tell I wouldn’t be happy unless we won. He was probably right. When I learned about the strategic review I knew I wanted to buy the business. I believe in it.”
When it was all over, rather than celebrate, Mei fell ill. “When it was announced by GIC and the company that we’d been selected, I was sick for a whole week. My immune system just crashed.”
“When it was announced by GIC and the company that we’d been selected, I was sick for a whole week. My immune system just crashed.” – Ming Mei
Mei regarded the whole process as a test of his and the firm’s mettle. He was determined to continue pursuing its objectives irrespective of the outcome and speaks glowingly about the progress GLP made during the period: annual earnings of $794 million, 10 percent higher year-on-year and the highest in the firm’s history; it achieved record leasing, too: 143 million square feet, up 35 percent; and its fund management platform grew by $9 billion, or 23 percent to $43 billion with the launch of European funds and a first Chinese value-added fund.
The European fund launches were possible after it acquired European developer Gazeley for $2.8 billion from Brookfield – the two firms’ other bit of business together. Bruce Flatt, Brookfield’s chief executive, has known Mei for a decade and had wanted to work together before last year. But little geographic overlap for the strategies they were pursuing meant mutually beneficial opportunities were previously hard to find. “Today, he’s looking to do more outside Asia and we’re doing a lot more in Asia,” he says. Surprising to many onlookers, GLP also competed for Logicor, an assembly of 50 logistics portfolios comprising 147 million square feet of space being sold by Blackstone, during the review period. That battle was lost, however, as CIC, one of its own investors, emerged victorious with a knockout €12.25 billion offer.
Markets: China, Japan, Brazil, US, Europe
Total AUM: $48 billion
Total square feet: 636 million
Key customers: include Amazon, DHL, Adidas, FedEx, Walmart, Schenker
Investors: include Hillhouse, Hopu, Bank of China, HKMA, CIC, CPPIB, Temasek
Reflecting on the period, Mei says: “People assumed I was spending most of my time on bidding for GLP while the strategic review was going on. Some of our competitors were happy. They thought I was distracted. But we achieved record earnings and leasing. The team was very focused on growing the business, including myself. We couldn’t get Logicor, but closed Gazeley. We were focused on creating value and never paused.”
And he rejects the suggestion Gazeley was consolation for missing out on Logicor. “CIC did a good job and obviously I’m disappointed we didn’t win. But I’m happy with the team at Gazeley. They have a culture that fits: we both have a history of development and customer focus. From a long-term value standpoint, Gazeley will create more because of that. Obviously, we would have loved the AUM of Logicor with the fees that brings. But they’re two different propositions.”
A man for the progressive
It is these long-term convictions that have enamored Mei among the sector’s elite and, critically, seen him earn their trust. Investors in the privatization have their capital locked in for eight years minimum. Many are looking to stay invested for longer, Hillhouse’s Lei among them. “GLP is a long-term investment,” he says. Hillhouse owned around 8 percent of GLP’s stock when it was listed and has taken a 22 percent position in the take-private. “This is now more than just a real estate company but a platform company with a lot of value to be considered.”
HKMA’s Chan adds: “Even if he kept to running just a warehouse business in China, that’s a huge play and I’m sure it’d be profitable. But he sees things beyond a five to eight-year horizon and he starts early. We’ll benefit from him being a first mover.”
Goodwin Gaw, chairman of Hong Kong private equity real estate firm Gaw Capital Partners, is another high-profile fan of Mei. He admits wanting to participate in the privatization, but says his available capital “was too expensive”. He was not surprised such a blue-chip cohort of investors backed the deal, though. “Investors increasingly love out-of-the-box thinking in a world that has become quite disruptive. Hillhouse, Hopu and guys like those breathe this kind of thing. They believed the story and that’s why they helped Ming go private.”
“Investors increasingly love out-of-the-box thinking in a world that has become quite disruptive. Hillhouse, Hopu and guys like those breathe this kind of thing. They believed the story and that’s why they helped Ming go private.” – Goodwin Gaw
Mei’s networking skills are evidently effective. Flatt, Lei, Chan and Gaw are industry leaders in their own right and each speaks glowingly of him. Significantly, when asked how they met, often mutual high-profile acquaintances played a part. Flatt and Mei share a strong bond with Seek Ngee Huat, the one-time head of GIC’s real estate business and GLP’s own chairman, for example. “He has been very active in establishing networks,” Chan remarks. “People like Bruce from Brookfield, Goodwin from Gaw Capital, they could be competitors but have become good references for him.”
Chan also believes Mei’s appetite to learn from other sector leaders sets him apart. “He is very smart, but also humble and pragmatic,” she says. “There are lots of smart people in the world, but not so many who are also humble and willing to listen and learn from others.”
Flatt concurs, revealing Mei visits him regularly. “He always wants to learn about the business and one of the ways to do that is to go see other people who have built businesses.”
With approximately $285 billion of real estate, private equity, infrastructure and renewable power assets, Brookfield is one of the biggest alternative asset managers in world.
Lei regards Mei’s integrity as another reason for working together. “Such high ethics and professional standards are sometimes hard to find in the real estate industry,” he says. “He is very thoughtful and he tries to be fair. He may lose a deal here and there; maybe he doesn’t expand as fast as he could. But long-term, it is a huge asset to be empathetic of other people.”
“There are lots of smart people in the world, but not so many who are also humble and willing to listen and learn from others.” – Clara Chan
Mei says maintaining a good reputation is critical. He references a recent time when one of GLP’s biggest Chinese e-commerce customers wanted space that had been verbally committed to another, smaller, tennant, and for 30 percent less rent. That e-tailer was refused: “Our name and reputation are everything. Make a handshake or commitment, you better deliver – even if it turns out to be a bad deal for us. A promise made is a promise kept.”
His rhetoric echoes the words of Schwartz who, in his own profile interview with PERE in 2013 shared the best bit of advice from his own mentor, a Florida developer named Elmer Krauss. “He really stressed on me that reputation is the greatest asset you ever have, and nothing is ever worth even taking a 0.1 percent risk to your reputation,” Schwartz said.
On a pedestal
Besides his own father, for whom he conducted his first property deal as a teenager, a restaurant in the small town of Marion in Indiana, Mei regards Schwartz as his main influence. He acknowledges the faith others have placed in him but places Schwartz on the highest of pedestals. Besides immediately recognizing Mei’s talents when he interviewed for a job at Prologis as a 29-year-old executive at building and composite materials giant Owens Corning – he peppered Mei’s cell phone with messages to offer him the role before he had even made it home – Schwartz fast-tracked Mei’s career after he joined. Starting with making him the firm’s youngest managing director, Schwartz entrusted Mei to grow Prologis’ China business.
It was that trust that Mei repaid after Schwartz found himself ousted as CEO after disagreeing with the firm’s board about how to tackle its low share price and mounting debt pile in the midst of the global financial crisis.
“I would forget about what happened before the business was purchased by Ming in 2009. Beforehand, he was a young guy who worked for someone else. But in 2009, since he bought the company with GIC, he’s proven to be able to run the business. There’s no doubt he’s a seasoned executive today.” – Bruce Flatt
Indeed, it is Mei’s telling of that period that illuminates how a mentor-student relationship with Schwartz morphed into an equal partnership, perhaps even one in which Mei became the more powerful of the two figures. “This is the part I’ve never told,” he says. In the lead-up to the crisis, Prologis was already the biggest logistics real estate business in China and Mei was alive to other opportunities. When another job materialized – leading the then-fledgling real estate operation of Hong Kong private equity firm PAG – he decided to quit Prologis. Cue a second anecdote involving Mei suffering physically in a stressful situation. “As I was about to tell Jeff I was resigning, all of a sudden my arms went numb and my heart stopped pumping. I was so stressed. I felt like I was betraying a friend.”
Schwartz, renowned also for emotional connections to his team, was predictably devastated. But then the financial crisis changed everything for both men. With Schwartz sidelined by Prologis, Mei made contact with GIC Private about buying the aforementioned China and Japan assets. “I approached Prologis at the same time and they told me if I can get the deal done they’d support it.”
And this is the bit many in the sector do not know: It was Mei who insisted Schwartz and he co-ran the resultant business, Global Logistic Properties. “People always knew me as underlying and reporting to Jeff,” Mei recalls. “But it was in that moment he truly understood who his friend was.”
Now that history is slowly seeping out, it is reinforcing Mei’s reputation in the industry. Brookfield’s Flatt says: “I would forget about what happened before the business was purchased by Ming in 2009. Beforehand, he was a young guy who worked for someone else. But in 2009, since he bought the company with GIC, he’s proven to be able to run the business. There’s no doubt he’s a seasoned executive today.”