EXCLUSIVE: Why GLP Loves the U.S. Industrial Sector
- Aug 07, 2015
By Gail Kalinoski, Contributing Editor
Global Logistic Properties Ltd. has been in the thick of some of the year’s biggest industrial deals. The Singapore-listed logistics provider took a 55 percent stake in the $8.1 billion IndCor portfolio with GIC, and agreed last week to pay $4.55 billion for Industrial Income Trust’s 58 million-square-foot portfolio. So it was only natural to ask whether more moves are in store before the year is out.
In an exclusive interview with Commercial Property Executive, Stephen Schutte, GLP’s chief operating officer, addressed that question and others via email from Singapore.
CPE: The IIT acquisition coupled with the IndCor Properties stake acquisition earlier this year will make GLP the second largest owner of industrial properties in the U.S. Are there plans for any acquisitions for the rest of this year, or will the team likely wait until 2016?
Schutte: We are always exploring possibilities for growth, but nothing else is planned at this time. Our focus is on integrating the platform now and increasing the lease ratio. But over time, if strong fundamentals exist, there is potential to grow the platform. We have a strong on-the-ground team that would make this possible. We regularly review new transactions but would only act if the returns were compelling.
CPE: Will the focus instead be on negotiating with new and existing capital partners to sell off stakes to institutional investors?
Schutte: The focus will be on negotiating with a mix of new and existing capital partners. GLP is in discussion with several potential capital partners. There is interest from sovereign wealth funds and state pension funds from around the globe.
CPE: Is that a strategy also being used on the IndCor portfolio?
Schutte: Yes. GLP is in contract to reduce its stake in GLP U.S. Income Partners I (the IndCor portfolio) from 55 percent to 10 percent. The announced capital partners comprise three leading global institutional investors, including two from Asia and one from North America. (http://www.glprop.com/press-releases/382-glp-announces-new-investors-into-glp-us-income-partners-i.html)
CPE: What is attracting GLP to the U.S. commercial real estate market at this time, particularly to the industrial sector?
Schutte: The U.S. logistics real estate market has been experiencing solid growth. Within our existing portfolio, we have seen strong leasing, with rent change on renewals reaching 21 percent, the highest level in many years. Rising trade, output and employment levels are generating demand for industrial real estate, highlighted by five consecutive years of positive absorption. Supply remains well below historical levels: the average new supply of total stock over the past five years was 0.4 percent p.a. (per annum) vs. the long-term average of 1.4 percent p.a. With such a limited new supply, the market is positioned for sustained rent and occupancy.