Asia’s largest warehouse developer Global Logistic Properties (GLP) has set up a new, RMB 15 billion ($2.1 billion) fund to invest in stabilized logistics assets in China.
The vehicle, GLP China Income Partners I, marks the Singapore-based company’s third fund dedicated to recycling capital in China and is expected to invest in about 3 million square feet of logistics properties in roughly 20 cities across the country.
The local currency fund, which was established with a group of “leading domestic institutional investors,” boosts GLP’s fund management platform to $86 billion of assets under management, according to a statement by the company. The new strategy will target modern, income-generating facilities in prominent locations, with GLP China set up to manage both the fund and its assets, the company added.
GLP’s latest bet on China comes after the firm, which has a global portfolio spanning 60 million square metres (645 million square feet), announced two new logistics funds totalling $3.6 billion in the country in 2018. The company has raised nearly $7 billion of income funds over the past two years.
“The establishment of GLP China Income Partners I is consistent with GLP’s strategy to further expand its fund management platform through establishing new funds and increasing its capital recycling initiatives,” noted Teresa Zhuge, executive vice chairman of GLP China in a statement.
Warehouse Giant Ramps Up in China
GLP, which launched its first China fund in 2013, today manages $16 billion of funds in the country, according to its corporate website. As of year-end 2018, GLP had a portfolio of 1,501 completed logistics and light assembly facilities with a total gross floor area of around 24.3 million square metres in China, with another 5.9 million square metres under development or being repositioned. Roughly 76 percent of the logistics and warehousing space caters to domestic demand.
GLP teamed up with Singaporean sovereign wealth fund GIC in September of last year to establish a USD-denominated, $2 billion fund to invest in value-add, income-generating logistics facilities in the mainland. That followed the launch of GLP’s first China value-add fund, with mainland insurance giant China Life as the sole investor in the RMB 10 billion ($1.6 billion) vehicle dubbed GLP China Value-Add Venture I.
In May of last year, GLP also set up a RMB 10 billion ($1.6 billion) private equity fund to invest in logistics-related businesses in China. The vehicle is managed by GLP’s private equity platform Hidden Hill Capital and backed by institutional investors and insurance firms, including an arm of state-owned China Post Group.
Global Investors Bet on Modern Sheds
The rapid development of China’s logistics market, driven by rampant e-commerce demand, has attracted major fundraising deals in recent years. CBRE Global Investors and Australia’s Logos Property Pty. Ltd. partnered to raise $800 million for a yuan-denominated China logistics vehicle in September, according to a report by PERE.
LaSalle China Logistics Venture LP raised nearly $359 million in June, according to a filing, following a PERE report that US-based LaSalle Investment Management was planning a $1 billion China logistics fund. The previous month, Allianz Real Estate announced it was ploughing $600 million into GLP-managed real estate investment funds which target investments in China and Japan.
Retailers are also stepping up their logistics investments in China, with Walmart announcing in July it would spend RMB 8 billion ($1.3 billion) building or upgrading more than 10 distribution centres over the next decade or two. The logistics arm of Chinese e-commerce firm JD.com reached the first closing of its first RMB-denominated industrial fund targetting a total of RMB 1.5 billion ($218 million) in the same month.
China’s logistics sector is showing signs of softening, with CBRE flagging an exodus of e-commerce tenants that is expected to dampen leasing activities in newly constructed warehouse space, according to a second quarter market update by the brokerage.
The report forecasts that around 3.4 million square metres of new warehouse space will come online in China during the second half of 2019. Logistics rents grew by a mere 1.3 percent year-on-year in the second quarter, with rental growth this quarter confined to Beijing, Guangzhou and Shenzhen.