New GLP C-REIT Shares Start Trading in Shanghai After $260M Follow-On Offering

New shares of GLP C-REIT have begun trading on the Shanghai Stock Exchange after the Chinese warehouse trust completed a RMB 1.85 billion ($260 million) follow-on equity offering earlier this month.

The share placement was supported by 16 mainland institutions including asset management firms, securities companies and insurers, GLP Capital Partners said Monday in a release. The proceeds will be used to acquire a trio of assets developed by the trust’s sponsor — namely GLP Park Qingdao Qianwan Port, GLP Park Jiangmen Heshan and GLP Chongqing Urban Distribution Logistics Centre — expanding the portfolio to 10 assets with a total leasable area of 1.16 million square metres (12.5 million square feet).

GLP C-REIT is the first onshore logistics trust to list on the Shanghai bourse and the fourth C-REIT to successfully carry out a secondary offering. Teresa Zhuge, executive vice chairman and president for China at GLP Capital Partners, said logistics remains one of the pillar industries supporting economic growth in China.

“As the C-REIT market continues to grow in size and liquidity, we are in a strong position to accelerate our asset monetisation strategy and grow our AUM,” Zhuge said.

Collecting Milestones

Led by co-founder and CEO Ming Z Mei, GLP became the first international company to list a REIT in China when it teamed with mainland investment bank CICC to launch GLP C-REIT in June 2021. The logistics giant raised RMB 5.85 billion through the listing of GLP C-REIT, whose existing seven-asset portfolio spans more than 700,000 square metres of gross floor area.

The trust’s top asset is GLP Beijing Airport Logistics Park, a 130,540 square metre facility valued at RMB 1.68 billion with an occupancy rate above 96 percent as of March.

The average occupancy rate of GLP C-REIT’s portfolio was 91.6 percent as of last December, with properties leased to clients in biomedicine, manufacturing, third-party logistics and e-commerce, GLP Capital Partners said.

The trust’s recent fundraising was executed after Fitch Ratings last month placed the Singapore-headquartered sponsor on “rating watch negative” for what the agency called “uncertainty in GLP’s deleveraging effort via asset monetisation”, referring to the group’s plan to sell a majority interest in its Chinese logistics portfolio.

In Fitch’s May commentary, the ratings agency said GLP’s credit metrics deteriorated in 2022 as the multiple of net debt to recurring EBITDA rose to 12 times from a level of 7 times in 2021.

Fitch expects declines in GLP’s logistics rental income to accelerate after the disposal of its Chinese logistic assets, with the rising contribution from data centres, cold storage and fee income to effect a “material change” in the company’s business mix.

Long-Term Market Potential

According to UBS research, if just 2 percent of China’s $60 trillion in infrastructure assets were securitised via REITs, the C-REIT market could grow to as large as $3 trillion by 2030, making it the largest globally.

“Global investors generally like REITs for access to real estate returns in a well-managed, efficient vehicle,” the Swiss bank said. “Thus, we believe their participation in C-REITs could be significant if investing restrictions are eased.”

In March, GLP arch-rival ESR got the green light from the Hong Kong stock exchange for a proposed spin-off of three mainland logistics projects and their potential listing through a C-REIT on the Shanghai Stock Exchange.

First announced last December, ESR’s proposed trust involves the first three phases of the company’s Kunshan Huaqiao Park complex, totalling more than 427,000 square metres of gross floor area. The complex is located in Kunshan’s Huaqiao town, roughly midway between Shanghai and Suzhou in eastern China’s Jiangsu province.