Global Logistic Properties, which is still in the process of being acquired by a mainland investment consortium, has expanded into Europe by acquiring a portfolio of Gazeley-branded logistics facilities from Brookfield for $2.8 billion, according to an announcement today by the Singapore-based firm.
GLP is leveraging its role as a fund manager to finance the acquisition of 1.6 million square metres of European warehouse space, with the company paying $1.2 billion in cash for the portfolio and the remainder of the purchase being financed via debt which it ultimately plans to syndicate to other investors.
Brookfield, the Canadian real estate investment firm which purchased Gazeley in 2013, is said to have had a number of suitors for its European assets, with GLP apparently having outbid Blackstone and UK asset manager Schroders for the set of sheds.
“We have been looking to expand to Europe and this portfolio presents an attractive entry point given the quality and location of the assets,” said GLP co-founder and CEO Ming Z. Mei in a statement. “This transaction adds a premier operational and development platform for us in Europe and is part of our long-term strategy to expand our fund management business.”
For Mei, who together with China Vanke, Hillhouse Capital, Hopu Investments and an affiliate of Bank of China, made a successful bid to privatise GLP earlier this year, the deal brings not only Gazeley’s current portfolio, but a pipeline of another 1.4 million square metres of projects that will provide the logistics developer with a total of three million square metres (32 million square feet) of warehouse space spread across the UK, Germany, France and the Netherlands.
The existing Gazeley European assets are said to be 98 percent leased with a weighted lease expiry of nine years. Along with acquiring Gazeley’s sheds, GLP will also be picking up relationships with the European operations for Amazon, as well as UK retailers John Lewis, Waitrose and Tesco, all of which currently lease space in the portfolio.
After Brookfield purchased Gazeley four years ago it merged the UK-based firm with the assets of US industrial REIT Industrial Developments International to form IDI Gazeley. According to its website, IDI Gazeley holds assets in North America, Europe and mainland China, including five mainland properties that Gazeley developed prior to 2013.
GLP’s statement today made no mention of IDI Gazeley’s North American or Chinese projects. IDI Gazeley and Brookfield were not available for comment on the transaction at the time this article was published.
As part of the deal GLP will acquire five Gazeley offices across Europe with the company saying that it intends to retain the existing management team, as well as the Gazeley brand.
The Gazeley acquisition gives GLP a chance to leverage its position as a fund manager and its Chinese connections to acquire European assets in a favored asset class.
In a presentation to potential investors, the company which markets itself as a fund manager as much as warehouse builder, says it is already in negotiation with interested capital partners wishing to invest in its European expansion. Analysts familiar with the proposed investment indicate that GLP will ultimately retain only a 15 percent stake in the Gazeley portfolio.
In its statement GLP indicated that it will fund the equity portion of the deal via cash on hand, existing credit facilities and new indebtedness, without needing to issue new equity.
China has largely shut down cross border investments in real estate this year with the exception of deals that support its One Belt One Road initiative and other transactions that can be shown to support the country’s geopolitical ambitions. Logistics would appear to fit this set of 2017 investment criteria with Chinese sovereign wealth fund CIC having given its own stamp of approval for European warehouses through its $13.4 billion acquisition of Logicor from Blackstone in May.
Brookfield put Gazeley’s European assets on the market in June for a reported GBP 1.5 billion ($2 billion), shortly after CIC’s Logicor acquisition was announced.
With GLP’s new owners including some of the mainland’s most prominent private equity players, such as Hopu Investment Management’s Fang Fenglei and Hillhouse’s Zhang Lei, along with mega-developer China Vanke, the GLP consortium is in a position to offer its new European portfolio as one of the few government approved gateways through the great capital wall of China.
In a separate statement, Nesta Investment Holdings, the investment vehicle for the GLP privatisation said that it supports the company’s entry into Europe as part of the long-term strategy to expand its fund management platform.
Both Nesta and GLP indicated that they do not expect Gazeley acquisition to affect the timeline of the proposed privatization of GLP.