GLP C-REIT Raises $260M to Buy Three Mainland Sheds as Deleveraging Questions Loom

GLP on Tuesday announced the completion of a RMB 1.85 billion ($260 million) follow-on equity offering by its China REIT to acquire three logistics facilities, as the industrial specialist continues to flex its fundraising muscle despite analyst concerns about its debt load.

GLP C-REIT issued 438 million shares at the final offer price of RMB 4.228 per unit, the top end of the initial range provided, GLP Capital Partners said 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).

The fresh capital raise comes after Fitch Ratings last month placed Singapore-headquartered GLP 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.

Changing Business Mix

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.

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.

“A lack of progress in its asset monetisation and deleveraging plan or significant deterioration in its business profile after the transaction could lead to negative rating action,” the agency said.

Bloomberg reported that GLP’s investment-grade dollar bonds have been the worst performers in Asia this year and risk being downgraded to junk territory.

Investor Confidence

GLP C-REIT’s latest milestone comes right on the heels of a hefty equity offering for GLP J-REIT in which the Tokyo-listed trust aims to raise JPY 30.9 billion ($220 million) for the purchase of three warehouses and a 30 percent stake in a fourth shed.

In a first for a Japanese REIT, the trust has set aside a dedicated portion of the equity offering to target high-net-worth investors, who will contribute JPY 10 billion towards the fundraising.

“We are delighted that our global offering has attracted substantial interest from a diverse range of investors, including notable institutional investors from Japan and abroad,” said Yoshiyuki Miura, president of GLP J-REIT’s manager.

The four incoming assets, which include two on the main island of Honshu and one each on Kyushu and Okinawa, were developed by sponsor GLP and will add 269,487 square metres of gross floor area to the $6 billion trust’s portfolio.