Institutional Investor Review: Documenting the most outstanding investment people and events

Analyst | Rafael Ge

Editor | Manuel Bai

Out of Institutional Investor Review | IIR Research Institute

Authorized by: IIR Research Institute

This is not GLP, it's not the same thing.

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In the 1980s, Progolis (formerly GLP, now AMB) proposed the concept of logistics real estate (logistics real estate refers to the logistics activities of logistics real estate developers who select suitable locations, build dedicated logistics facilities, and sublease them to their customers and provide related property management services according to customers' needs), and took the lead in practicing the concept, and now Progolis has become one of the world's largest logistics companies. Progolis has long been the world's largest logistics real estate developer. According to the official website of Progolis, as of the end of 2020, the business of Progolis covers 19 countries on four continents, with assets under management totaling $145 billion, and the annual flow of goods totaling $2.2 trillion, which is equivalent to 3.5% of the total GDP of 19 countries.

Global Logistic Properties Limited ("GLP"), formerly known as ProLogis Asia, was acquired by the Government of Singapore Investment Corporation ("GIC") in 2008 for US$1.3 billion and listed on the Singapore Exchange Securities Trading Limited in October 2010.

Seven years later, on July 14, 2017, a Chinese consortium successfully acquired GLP for US$11.6 billion, with the consortium: Hauppauge Investments with 21.3% of the shares, Vanke Group with 21.4% of the shares, Gao Tiling Capital with 21.2% of the shares, Bank of China Group Investment Co. with 15% of the shares, and GLP management with 21.2% of the shares; on January 22, 2018 , GLP officially announced its delisting from the Singapore Exchange Securities Trading Limited and the privatization process was officially completed.

From the entry of US-based Progolis into the Chinese market in 2003 to GLP's core position in the domestic logistics sector today, the development of China's logistics real estate and logistics industry cannot be separated from the output and practice of companies and teams with rich international experience, and of course, it is also equally thanks to the foresight of the Chinese consortium's privatization of GLP a few years ago. IIR's case study will focus on the current GLP group, with an emphasis on investments in the logistics sector.

From Forced Selling to Wulin Domination: A History of GLP's Logistics Real Estate Domination

The completion of GLP's privatization in January 2018 represented the first time that a Chinese logistics giant had stepped onto the world stage.

From the $1.3 billion sale of all of ProLogis' Chinese assets and some of its Japanese real estate funds to form GLP in 2009, to the $11.6 billion consideration paid by a Chinese consortium to buy into GLP in 2017, to the sale of some of GLP's U.S. logistics assets to the Blackstone Group for $18.7 billion in 2019, GLP GLP's growth has been as exponential as its valuation, centered on China.

Global Network and Scale of Logistics Properties:

By the end of 2020, GLP GLP's global business will cover 17 countries across four continents, with more than $100 billion in assets under management and 63 real estate and private equity funds.

In 2020, GLP's new and renewed leases will total 22.7 million square meters globally, an increase of 57% year-on-year. During the same period, GLP's new construction projects will total 5.6 million square meters, involving a total investment of US$5.3 billion, an increase of 75% year-on-year.

GLP's logistics real estate operating model:

Unlike the asset-heavy model of cross-border and domestic logistics real estate developers such as Wanwei, Jingdong and Yupei, GLP's logistics real estate fund model realizes asset-light, high-turnover operations, effectively solves the capital-occupation problem in the process of holding properties for a long period of time, and accelerates its own expansion.

GLP China (Logistics):

GLP China is the platform for GLP to develop, operate and manage modern warehouses and logistics-related businesses in China, as well as private equity funds, asset securitization, strategic partnerships and investments.

With the development of the economy and the rise in consumption level of the population, the demand for logistics in China has been increasing, with e-commerce driving the rapid rise in demand for express delivery and warehousing, and the accelerated expansion of logistics real estate developers. As of 2018, the area of operational general warehouses across the country was 1.06 billion square meters, and the number of logistics parks reached 1,638 (data from China Industry Information Network).

GLP has grown rapidly in China through M&A + partnerships, and has become the largest provider of modern logistics and industrial infrastructure and services within China, with an absolute leading position in modern warehousing.

According to GLP China's 2021 Corporate Bond Prospectus released on January 20, 2021, as of September 30, 2020, GLP China held approximately 40.42 million square meters of logistics and warehousing space within its borders, and held approximately 29.89 million square meters of completed warehousing space, ranking No. 1 in modern warehousing within China. GLP China has 397 logistics parks covering 43 major cities and logistics hubs in China, with a total GFA of approximately 4,288 million square meters, and assets of over US$30 billion in China.

From January to September 2020, GLP China achieved total operating revenue of US$923 million, with revenue from its warehouse leasing and fund management businesses (mainly warehouse rental income, income from financial services related to warehouse customers and management fee income, etc.) accounting for 94.02% of the total operating revenue, of which warehouse rentals and related revenue accounted for 73.69% of the total operating revenue. 73.69%.

GLP China's Major Customers (Logistics Properties):

GLP China's customers are mostly large and medium-sized, with the majority of its major customers in the third-party logistics, e-commerce retailing, manufacturing, and pharmaceutical industries, etc.

GLP China's customers are mostly large and medium-sized.

In recent years, with the layout of the logistics ecosystem of GLP, the subject of GLP China's investment has gradually expanded to include logistics and transportation, which is the main industry in China, as well as the logistics industry in China.

Hidden Mountain Capital:

Hidden Mountain Capital is GLP's private equity investment platform, founded in 2018, mainly focusing on investment in the logistics ecosystem. According to CDFA data, Hidden Mountain Capital has two existing filed funds (one of which has been liquidated early), with a management scale of nearly 10 billion yuan.

Hidden Mountain Capital, as an investment platform under GLP, focuses on investing in areas complementary to GLP's logistics infrastructure business, further contributing to the construction of GLP's logistics ecosystem. As of the end of 2020, Hidden Mountain Capital has invested more than $6 billion in more than 50 companies, mostly in the logistics and transportation sectors (over 50%), and some of these projects have taken over a share of GLP's earlier investments.

GLP C&D Equity Fund:

In September 2020, GLP, together with Xiamen C&D Group, launched its first equity fund, GLP C&D Equity Fund, which is comprised of GLP, C&D Group, Xiamen Strategic Development Fund, FTZ, C&D Group, Xiamen State-owned Enterprises (SOEs) and GLP Capital. GLP, C&D Group, Xiamen State-owned Enterprises Strategic Development Fund, FTZ and Xiang'an District*** co-funded the fund, and established Xiamen Junju Investment Management Co. The fund has a target size of RMB 7.5-10 billion, and the first round of fundraising of RMB 5 billion has been completed. In addition, GLP will continue to provide the same identity and principles of GLP, with the mother fund team recruited on a market-oriented basis and professionals with rich experience in mother fund investment.

As of February 10, 2021, GLP C&D Equity Fund has invested more than RMB 600 million in five funds, including Zhongding Capital, Junlian Capital, Morning One Investment, Hubei Kaihui Fund and Yuan Sheng Venture Capital.

In October 2020, GLP's C&D Equity Fund made its first direct investment in Zhenkunxing, and during the same period of time, the following institutions participated in the investment: Yunfeng Fund, China State-owned Enterprises Structural Adjustment Fund, Tencent Investment, Matrix Partners China, Junlian Capital, Tongchuangweiye, C&D Emerging The company's investment portfolio includes: Yunfeng Fund, China State-owned Enterprises Structural Adjustment Fund, Tencent China, Junlian Capital, Tongchuang Weiye, C&D Emerging Investment, Zhongding Capital, Yuan Sheng Venture Capital, etc. It can be seen that GLP's C&D Parent Fund, which is a direct investment part, has also had frequent interactions with its invested GPs, and has been actively acquiring opportunities for direct investment projects.

Logistics Investment Partners: GLP and Zhongding Capital

Zhongding Capital is a logistics-focused organization, and it is well known that Mr. Mei Zhiming, as the head of GLP, also serves as a founding partner and chairman of the investment committee of Zhongding Capital. Since its inception, Zhongding Capital has been y involved in the logistics sector, and has had many interactions with GLP, with a lot of cross-pollination in its investment targets.

Conclusion

The logistics sector (including logistics real estate) is asset-heavy and capital-driven. GLP, as the representative of an industrial capital with overseas genes that has been fully localized, has formed a more stable triangle of logistics real estate development, operation, and fund management.

With the rapid rise of domestic consumption upgrades and e-commerce, the logistics industry has entered a new competitive landscape of opportunities and challenges, and the fund management business not only gives GLP financial leverage, a new source of profit, and a quicker return on capital, but also attracts various types of intangible resources, making it a powerful platform to leverage its resources. The fund management business not only gives GLP a new source of financial leverage and a quicker return on investment, but also attracts a variety of intangible resources as a logistics infrastructure builder, giving it a strong circle of friends, such as large internet platforms, insurance companies, and real estate developers.

With a combination of internal and external funds, LPs and direct investments, and deep partnerships, GLP has become a model for seizing the opportunities in China, building China's logistics infrastructure, and empowering the industry in depth.