Global Logistic Properties Ltd. (GLP), the world’s second-biggest owner of industrial properties, plans to raise S$404 million ($330 million) from the sale of new shares to fund its investment in Brazilian warehouses.
The unit of Singapore’s sovereign wealth fund will sell 160 million new shares at S$2.59 each, GLP, as the company is known, said in a statement to the Singapore exchange today. The price is a 4.8 percent discount to its last close of S$2.72 on Nov. 12. GLP will buy the Brazil properties for 2.9 billion real ($1.4 billion) with its Singapore parent, Canada Pension Plan Investment Board and China Investment Corp.
GLP is expanding its assets to profit from rising consumption and affluence in Brazil that is leading to increased demand for distribution facilities. It’s investing in the country through two ventures that will together own 39 properties in an economy that recorded an average 4 percent growth over the last seven years, adding to its existing assets in China and Japan, the Singapore-based company said yesterday.
“Although GLP has plenty of cash and relatively low gearing, management’s decision to finance the Brazil investment through a separate placement is to make it clear to investors that its Brazil foray will not detract in any way from the growth of its China and Japan business,” David Lum, an analyst at Daiwa Capital Markets, said.
GLP has $1.4 billion of cash and a further $1 billion after selling 30 of its Japanese properties through a real estate investment trust, Lum said. He lowered his rating on the stock to hold from outperform because “the Brazil deal is probably a net positive for GLP, but we see no reason to be too euphoric on the deal at current price levels.”
The stock dropped as much as 5.5 percent to S$2.57, set for the biggest drop since Oct. 4, 2011, and traded at S$2.60 as of 9:13 a.m. in Singapore trading. The stock was halted from trading yesterday.
The decline pared the gain this year to 48 percent, the fourth-best performer on the Singapore benchmark Straits Times Index (FSSTI), and beat the average 33 percent among the world’s 10 biggest industrial property owners tracked by Bloomberg. Prologis Inc. (PLD:US), its bigger rival, advanced 15 percent in 2012.
GLP will set up two ventures with parent Government of Singapore Investment Corp., the Canadian retirement fund and China’s sovereign fund to purchase logistic facilities from Brazil’s Prosperitas, GLP said in the statement yesterday. GLP will act as the asset manager of the acquired properties, 88 percent of which will be located in Sao Paulo and Rio de Janeiro, it said.
Brazil is “an attractive market with strong fundamentals and compelling opportunities for growth,” Chief Executive Officer Ming Z. Mei said in the statement. “We remain mindful of the global economic conditions, but are confident that our unrivaled market presence in China, Japan and now Brazil positions us well for future growth.”
With the acquisitions in Brazil, GLP’s assets will almost triple to $7.2 billion from $2.6 billion and create additional recurring cash flow streams in the form of income and dividends, Jeffrey Schwartz, deputy chairman of GLP, said on a conference call in Singapore.
The first venture includes 34 properties and one project under development, where GLP and CIC will each hold a 34 percent stake, it said. The second has five development projects, which will be jointly owned by GLP, Canada Pension and GIC, it said.
GLP has operations in seven locations in Japan with a combined net asset value of $3.93 billion. It has properties in 29 cities in China with a net asset value of $3.65 billion as of June 30, it said. In December last year, the company teamed up with CIC to buy 15 Japanese warehouses for 122.6 billion yen ($1.5 billion) from LaSalle Investment Management.
GLP said yesterday it’s raising about 104.8 billion yen through an initial public offering that is poised to be Japan’s second-biggest this year. The company will sell 1.75 million shares in the sale and seeks to list in Tokyo on Dec. 21, according to a document filed with the country’s stock exchange yesterday. The final IPO price will be set on Dec. 12, according to the document.
The company also said yesterday its second-quarter profit declined 3.1 percent to $194.5 million from $200.7 million. Sales rose 25 percent to $172.9 million.
The share sale is managed by Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and China International Capital Corp.
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