It is being pegged as the largest China-focused logistics real estate fund to have been raised to date, and befittingly enough, by the biggest developer and investor in Chinese logistics.
In late July, Singapore-based Global Logistic Properties announced the establishment of a $3.7 billion logistics infrastructure fund, CLF II, its second traditional commingled vehicle raised exclusively for investments in China. Including leverage, the fund’s total estimated investment capacity is a whopping $7 billion.
With this mega fundraise, the industrial real estate developer and fund manager now has the capacity to develop close to 140 million square feet of logistics facilities in the country over a span of four years, outstripping the development capabilities of other regional competitors. The construction of these new developments is expected to start by April next year.
At $7 billion, CLF II is more than double the size of its predecessor CLF I, which had an investment capacity of $3 billion with leverage. In fact, the $3.7 billion equity raise for CLF II represented a 20 percent oversubscription from its initial target.
Similar to the co-investment approach for CLF I, GLP has made a 56 percent equity commitment in CLF II. The remaining equity commitments are understood to have come from seven global institutional investors – five from Asia, one North American investor and one Middle Eastern investor. GLP was also able to get four investors in CLF I to invest in CLF II as well. What also helped was the performance of CLF I, given the firm was able to deploy the entire capital in less than half of the four-year investment period.
Speaking on the platform’s importance to GLP’s overall operations, Ming Mei, the firm’s chief executive officer said: “We see the fund management business becoming an important part of our earnings going forward. We expect to generate $150 million dollars in fees from the platform this year, and expect it to grow by 50 percent to 60 percent next year.”
Of all the markets GLP has a presence in, China remains its primary market for development, Mei told reporters in a media briefing last month. Indeed, the ongoing negative sentiment around investing in China and the slowdown in the economy hasn’t discouraged it from upping its stake in the country’s logistics sector. If anything, the improving retail consumption and the development of organized retail, or chain stores, are key pull factors, according to Mei. Currently, only 10 percent of retail in China is organized retail, but that is expected to grow to 60 percent or 70 percent over the next several years, he said.
GLP’s portfolio in the country currently comprises 127 million square feet of the total 441 million square feet of logistics facilities it owns globally. In September of last year, the firm wrapped up a $2.5 billion funding program to expand its operations in China, raising the targeted equity via a series of tranches from a group of state-owned companies and financial institutions in the country, including China Life Insurance Company and China Development Bank International Holdings. Additionally, to enhance its land sourcing capabilities, it struck a separate deal with China Development Bank Capital, the bank’s equity investment and asset management arm, to become its major partner for logistics infrastructure development in China.
GLP may have lunged ahead of its peers in the logistics sector, but it certainly isn’t hitting the pause button anytime soon.