Global Logistic Properties (GLP), an unit of the GIC Singapore, has formed a 50:50 JV with China Investment Corp to acquire a US$1.6bn logistics portfolio from LaSalle Investment Management, seeing strong demand for modern storage after the March earthquake. This is at an 8% discount to the portfolio’s latest appraised value.
GLP manages about $11.7 billion of facilities in Japan and China for customers including Amazon.com Inc. and Deutsche Post AG’s DHL International GmbH. The acquisition not only consolidates its market leadership in Japan but also provides a beachhead for the creation of an asset-management platform. GLP will become the asset manager of the portfolio with a new fee income stream by 3Q12. This transaction will boost the company’s revenue from fees generated from asset and property management.
We believe that the acquisition is a steal, given the cheap valuation in the Japanese property market and the recovering demand. The portfolio is 3% under-rented and hence presenting an avenue for organic growth. GLP’s balance sheet remains healthy with an estimated net gearing of a mere 0.4x. GLP is given a target price of $2.27 by one of the brokerage houses and is currently up 1.83% at $1.670.
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