Global Logistic Properties (GLP) will start marketing today for what could become the largest initial public offering in Singapore ever. The company has already attracted a lot of interest among institutional investors as one of the largest providers of modern logistics facilities in China and Japan and also because it is being spun off from the Government of Singapore Investment Corp (GIC), one of the city-state’s two sovereign wealth funds.
An IPO sponsored by GIC as the major shareholder is a rarity, as is a deal of this size in Singapore, and this is one offering it has taken little effort to get investors to focus on – even if it is coming to market just ahead of pan-Asian insurer AIA Group. Indeed, nine entities have already committed to buy one-third of the GLP deal, which will translate into a 13.8% stake in the company. Depending on the final price, their combined investment will amount to between $794 million and $870 million.
These entities, which include an e-commerce company, a unit of China’s National Social Security Fund, a couple of real estate investment management companies and a few financial investors, are referred to as cornerstone investors, but will not be subject to a lockup. Still, their commitment to invest at any price within the price range is likely to instil confidence among other investors too.
Including the cornerstone tranche, GLP is aiming to raise between S$3.14 billion and S$3.45 billion ($2.4 billion to $2.6 billion). This will trump the $2.05 billion IPO by CapitaMalls Asia, the shopping mall business that was spun off from property developer CapitaLand in Singapore’s largest listing last year, and will also exceed Singapore Telecommunications’ record listing in 1995. And if the overallotment option is exercised in full, the final deal size could increase to as much as S$3.91 billion ($3.0 billion).
GLP is offering approximately 1.76 billion shares at a price between S$1.78 and S$1.96. Some 60% will be targeted at institutional investors, while 6.7% will be earmarked for retail investors. The price range translates into 1.03 to 1.09 times GLP’s book value at the end of June this year, according to a source.
In a listing prospectus published on the Monetary Authority of Singapore’s website yesterday the company said it will use about S$1.5 billion of the net proceeds to support its growth in China and Japan, S$600 million to pay down existing shareholder loans and inter-company advances, and a further $700 million to redeem preferred equity.
A key attraction of the company in China, according to analysts is that about 80% of the company’s warehouses are catering primarily to domestic consumption. This means it isn’t reliant on the import-export market and to some extent it can be viewed as a play on domestic consumption. Properties focusing on logistics also offer a higher yield than retail or office properties, have a short development period and typically start to generate stable rental revenues after little more than a year.
However, China is where the company sees the greatest growth opportunities, while its logistics facilities in Japan provide a stable source of cashflow.
In the prospectus, GLP noted that while the Japanese logistics facilities industry is well-established, it believes there is a dynamic within the industry -- such as the scarcity of large, modern, efficient and network-integrated logistics facilities, a focus on cost reduction and outsourcing, and an increasing customer preference for leasing rather than owning facilities -- that will shape the development of this market in the future, and which it intends to capitalise on.
Its international customers include well-known companies like Wal-Mart China, DHL, FedEx, UPS, Joyo Amazon, Sony and Panasonic.
Across China and Japan, the company owns, manages and leases out 296 completed properties, located within 120 logistics parks and two light-assembly facilities parks, with a gross floor area of 6.2 million square metres. In addition, in China it also owns an additional 1 million sqm of properties under development, 2.2 million sqm of land held for future development and a land reserve of 4.6 million sqm.
Aside from the National Social Security Fund, the cornerstone investors are: Alibaba Group; CBRE GRES, an investment management unit of real estate services firm CB Richard Ellis; Chow Tai Fook, the investment vehicle owned by Hong Kong property tycoon Cheng Yu-tung; an investment company owned by Peter Lim Eng Hock; ING Clarion Real Estate Securities; Lion Global Investors, a major Singapore fund management firm; Owl Creed Assent Management; and two investment companies that are part of the Nan Fung Group, a Hong Kong-based property developer.
Citi and J.P. Morgan are global coordinators for the offering, as well as joint bookrunners together with China International Capital Corp, DBS and UBS. Nomura is a lead manager and will be responsible for selling a small portion of the deal to retail investors in Japan under a Public Offering Without Listing (Powl).
