GLP prices largest Singapore IPO since 1993

The GIC spin-off which operates logistics properties in Japan and China attracts 450 institutional investors and is able to price the offering at the top of the range.

Global Logistic Properties (GLP) has raised S$3.45 billion ($2.6 billion) from Singapore’s largest initial public offering since 1993 as investors piled in to get a share of its lucrative logistics property business in China and Japan.

The company is a unit of the Government of Singapore Investment Corp (GIC), which clearly played a role in the appetite for the stock, but sources say the fact that the company is run by Jeffrey Schwartz may have been an equally important driver – especially in the US. Schwartz is deputy chairman for GLP and a co-founder and former CEO of warehouse owner ProLogis from which GIC bought the Chinese and Japanese assets that now make up GLP for $1.3 billion in 2008.

According to a source, Schwartz is well-known and highly regarded in the property industry in the US, and his involvement prompted a much stronger demand from US-based investors than is common for Asian IPOs. However, the majority of the demand still came from Asia, particularly from Singapore and China where the GIC name as well as the presence of a number of well-known local companies and tycoons as cornerstone investors didn’t go unnoticed. Among the top cornerstone names were: the Alibaba Group, a Chinese provider of e-commerce platforms; China’s National Social Security Fund, which made its first investment into an IPO as a cornerstone investor; Hong Kong property developer Nan Fung Group; Hong Kong tycoon Cheng Yu Tung’s Chow Tai Fook; Singapore investor Peter Lim Eng Hock; and Singapore-based Lion Global Investors.

Overall, the institutional tranche, which excluding the 33% cornerstone tranche accounted for 60% of the deal, attracted about 450 investors and was more than 12 times covered, although as the book grew larger, it can be assumed that some investors inflated their orders. The buyers included real estate specialists as well as high-quality long-only accounts.

GLP offered approximately 1.76 billion shares at a price between S$1.78 and S$1.96 and fixed the final price at the top end of the range for a valuation of 1.09 times book, based on figures until the end of June this year. At the final price, the nine cornerstone investors will invest a combined $870 million for a 13.8% stake in the company.

Some 6.7% will be offered to retail investors, while a small portion – expected to be less than 5% -- of the deal will be sold to Japanese retail investors through a public offering without listing (POWL). The POWL shares will come out of the institutional tranche.

The deal also comes with a 15% overallotment option, which could increase the total deal size to as much as S$3.91 billion ($3 billion), if exercised in full. Even without the overallotment option, the deal exceeded last year’s $2.05 billion IPO by CapitaMalls Asia, making it the largest IPO in Singapore since Singapore Telecommunications went public in 1993. 

A key attraction of the company is its growth potential in China, where about 80% of its 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. Initially, investors were sceptical towards the Japanese business, which many viewed as a drag on the more profitable Chinese operations, given the weak GDP growth in Japan. However, once they had met with the management and realised that GLP is actually growing at a healthy rate in Japan too, and that the stable cashflows in this part of the business provide a downside cushion for the expansion in China, most didn’t hesitate to participate.

The company owns, manages and leases 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, across China and Japan. Its international customers include well-known companies like Wal-Mart China, DHL, FedEx, UPS, Joyo Amazon, Sony and Panasonic.

Citi and J.P. Morgan were 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 responsible for the POWL tranche.

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