GLP Co-Invests with GIC on $8B IndCor Purchase
- Dec 10, 2014
Global Logistics Properties Ltd., the leading provider of logistics facilities in Asia and Brazil, is making a big move into the United States industrial market by taking a 55 percent stake in a deal with GIC, Singapore’s sovereign wealth fund, to buy IndCor Properties from Blackstone for $8.1 billion.
Blackstone announced last week it was skipping a planned IPO for IndCor, which is the second largest owner of industrial properties in the U.S. with a platform of 117 million square feet, and selling it to GIC. Although GLP was rumored to be part of the deal, the company would not confirm last week that it was joining with GIC on the largest industrial deal of the year.
GLP, which said in a release this week that the IndCor portfolio of high-quality warehouse and distribution properties would give it scale in the U.S., added it plans to reduce its stake to 10 percent by August as part of an expansion of its fund management platform. The company said it has already received strong interest from capital partners looking to invest in the U.S. logistics market.
“This transaction gives us immediate scale as well as the best team in the U.S. logistics market. The local management team is very experienced and we expect significant synergies given that we have worked with and alongside more than half of them previously,” Ming Mei, co-founder and CEO of GLP, said. “Investor interest for GLP US Income Partners I is strong and we remain confident of completing the fund syndication by August 2015.”
Despite the investment in the U.S. industrial market, Mei said China remains GLP’s key growth market.
“GLP will continue to focus on executing our expansion plans in China, Japan and Brazil, while also growing our fund management platform,” he said in the release.
The company said its fund management platform would grow by 61 percent following the transaction, which is expected to close in the first quarter of 2015.
The IndCor portfolio, which is spread across 36 major sub-markets in the U.S., is 90 percent leased as of Sept. 30. Rents are estimated to be approximately 7 percent below market. GLP said increasing occupancy and rents would provide upside potential.
Blackstone has been growing the IndCor portfolio since 2010. A wholly-owned portfolio company, IndCor is based in Chicago. Its assets are mainly located in desirable in-fill industrial markets, which benefit from key domestic and global transportation hubs, major logistics and warehouse/distribution networks and large population centers. The New York-based global real estate investment firm bought low during the economic downturn, building the company through at least 18 acquisitions, including two large ones earlier this year that gave it more than 16 million square feet of properties in Nevada, Southern California, Texas as well as Chicago, Portland, Los Angeles and Denver.
“We are acquiring IndCor because it is one of the largest industrial platforms in the U.S. and it is at an attractive point in the recovering U.S. industrial market cycle,” Tia Miyamoto, regional head, Americas, GIC Real Estate, said in a news release. “As a long-term investor, we believe that this investment will achieve stable income growth and will allow us to add value over the long run.”
For GIC, a leading global investment firm with more than $100 billion in assets under management, the IndCor platform is a way to diversify its holdings, particularly in the U.S. Early this year, it acquired a stake in the 1.1 million square feet of the Time Warner Center in Manhattan.
GIC and GLP said there has been solid growth in the U.S. industrial market with the last 18 consecutive quarters yielding positive net absorption.
“Lack of construction over the past five years has led to limited supply of 0.4 percent of total stock per year. There is stable demand for logistics infrastructure driven by continued growth in retail and e-commerce sales which are growing faster than GDP,” the two companies said in a joint statement.
Cassidy Turley noted in its U.S. Industrial Trends Report for the third quarter that the “U.S. industrial sector is booming.”
The report said the industrial sector absorbed 41.6 million square feet in the third quarter, adding it was the second strongest reading since recordkeeping began, surpassing the previous record of 46 million square feet set in the fourth quarter of 2012.
“As the nation’s markets tighten further – rent growth averaged nearly 3 percent for the past four quarters for the first time since 2000,” according to Cassidy Turley.