Global Logistic, CIC to Buy $1.6 Billion of Japan Warehouses
Global Logistic Properties Ltd. (GLP), a unit of the Government of Singapore Investment Corp., and China Investment Corp. agreed to buy 15 Japanese warehouses for 122.6 billion yen ($1.6 billion) as demand for modern storage is rebounding after the March earthquake.
LaSalle Investment Management is selling the properties, with 770,989 square meters (8.3 million square feet) of space mainly in Tokyo and Osaka, to a 50-50 joint venture by Global Logistic and CIC, according to a statement to the Singapore exchange yesterday. The acquisition will be funded with 81 billion yen of debt from a group of Japanese banks, they said.
Japan’s distribution centers are rebounding from record- high vacancies two years ago amid demand for modern storage after the March 11 temblor and tsunami destroyed industrial spaces, drawing investors. Investment in logistics may surge to more than 2 trillion yen this year from almost zero in 2002, according to CBRE Group Inc.
“Global money has returned to Japan in a big way,” said Masahiro Mochizuki, an analyst at Credit Suisse Group AG. “This transaction means that real estate prices in Japan have fallen to an attractive level.”
Global Logistic shares climbed 1.5 percent to S$1.665 at the close in Singapore. The city’s benchmark Straits Times Index (FSSTI) fell 0.1 percent.
A CIC official, who declined to be named because of company policy, confirmed the investment.
The purchase is the second-biggest deal in Japan for Global Logistic. The firm said Sept. 1 it formed a joint venture with the Canada Pension Plan Investment Board, manager of C$152.3 billion ($147 billion) as of Sept. 30, to invest $250 million each over three years in the nation.
Global Logistic 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 will add to its strategy to build a “management platform,” boosting its earnings from managing assets in addition to owning properties.
The transaction will boost the company’s revenue from fees generated from asset and property management, as well as performance incentive fees, said Jeffrey Schwartz, deputy chairman at Global Logistic.
“It’s all upside,” Schwartz said in a phone interview yesterday. The management fees “will be extremely substantial and significant over time.”
The acquisition will increase the space Global Logistic has in Japan to 3.6 million square meters from 2.8 million square meters, according to the statement. Prologis Inc. (PLD), which merged with AMB Property Corp., has 2.6 million square meters, a slide presentation from Global Logistic based on CBRE estimates showed.
Global Logistic said it will work with CIC and other partners to seek “opportunities” in other markets. The Singapore company manages 69 warehouses throughout Japan, it said before yesterday’s announcement. About half of the properties are in the greater Tokyo area including at least two facilities near Narita International Airport.
The higher return of distribution and storage centers has been partly helped by a shortage in supply after the collapse of Lehman Brothers Holdings Inc. in September 2008 froze credit markets. The addition of new space fell by about half in 2009 and plunged 74 percent in 2010 in Japan, Los Angeles-based CBRE estimated.
The properties Global Logistic and CIC are buying are worth 134.8 billion yen, based on the valuations done in August and October, Global Logistic said.
GLP and CIC won the bid about six months after the sale process first started. CIC, ranked the fifth-largest government fund worldwide, manages $409.6 billion, while Singapore’s GIC is ranked eighth with $247.5 billion, according to the Sovereign Wealth Fund Institute.
“For GLP, it’s a good partnership, it spreads the risk,” said Victoria Barbary, London-based managing director of Dhana Advisory, a firm specializing in sovereign wealth funds. “Japan at the moment could potentially be a great market because things have been quite lowly priced after the earthquake, but it’s quite high risk too. They do have quite a lot of Japan exposure in terms of balanced portfolio of properties. It’s a good deal both ways.”
Mitsubishi Corp. (8058), Kenedix Inc. (4321) and Blackstone Group LP (BX) were among the bidders, four people familiar with the deal said in July. The acquisition is the biggest deal in Japan this year, after Mitsubishi Estate Co. bought two buildings in Tokyo for 80 billion yen.
To contact the reporters on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net
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