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TOPSTORIES 2 | The Business Times | Monday, August 2, 2021 Warehouse giant GLP sees frothy valuations in certain logistics assets The real quality – the right locations and the right buildings, constructed to a high standard – assets are still at fair value, says GLP fund management chief Ralf Wessel marks ahead of expectations, but can be rationalised given the substantial weight of capital chasing strong cash- By Fiona Lam on-cash yields”, Mr Wessel said. [email protected] In Japan and Europe, for example, @FionaLamBT prime logistics cap rates have dipped Singapore to “mid-3 per cent” and “mid-to-high 4 WAREHOUSE giant GLP has observed per cent” respectively, he added. “In a asset values soaring ever higher in competitive marketplace, as at the global logistics sector and com- present, we could see these yield pressing cap rates, as a flood of new levels compress further”. entrants and investment capital jostle The Covid-19 pandemic has for limited supply. proven the need for a resilient logist- Over the last 12 months, prices ics supply-chain system, he said. Ex- have risen in most of the group’s mar- perienced, pure-play logistics special- Dense urban areas where people live and consume have always been the primary focus of GLP’s investment kets, in some cases clocking increases ists with an international footprint thesis for logistics real estate; in Japan, GLP is thus focused on Tokyo and Osaka; above: GLP’s large-scale of more than 20 per cent. are therefore “all growing quite fast”. logistics facility GLP Sayama Hidaka I, located in Greater Tokyo, Japan. PHOTOS: GLP This may create a risk of frothy At the same time, other players, in- valuations in certain pockets of the cluding investment managers previ- market, if investors deploy capital too As for GLP’s investment thesis for Meanwhile, GLP’s data-centre busi- The group’s current focus is on quickly without the discipline to dis- ously focused on hotels or malls, are logistics real estate, dense urban ness in China has grown to more than augmenting its presence in key mar- tinguish high-quality assets from also eager to get in on the action. areas where people live and consume 200 employees since it first invested kets where it holds market-leading po- lower-quality ones, said Ralf Wessel, “You can’t be “They want to do so in an acceler- have always been the primary focus, in the asset class in 2018. The data- sitions. To capture demand, GLP has managing director of fund manage- ated way, by hiring people very even before the e-commerce boom. centre arm has 10 assets that will de- accelerated its development activity. ment at GLP. specialists overnight; it quickly to set up a logistics fund or About 90 per cent of its leases, liver 800 megawatts of installed capa- In H1 2021, it started US$4.8 billion of He said he does not see such a risk takes time to build a platform. But you can’t be specialists based on leased area, are centred city in China upon completion. new development projects in China, emerging in GLP’s portfolio, given overnight; it takes time to build a around domestic consumption, in- “Our identified pipeline in China Europe, Japan, India and Brazil, up 82 that the Singapore-based logistics be- team, build your team, build your market presence, stead of imports and exports. potentially doubles that capacity over per cent from the year-ago period and hemoth is “very much a disciplined in- market presence, and and that distinctive factor plays a cru- “Whether it’s diapers, dog food, or the next two or three years,” Mr almost as much as its new develop- vestor” as well as a property de- cial role,” Mr Wessel told BT. bottles of water, everything comes Wessel said. GLP is also starting to ex- ment activity for the whole of 2020. veloper. that distinctive factor Institutional investors generally re- from a warehouse at some point,” Mr plore other markets, and it has Entering more new markets is un- “If you look at the real quality – the plays a crucial role.” main under-invested in industrial real Wessel said. “Where are the big cities? already identified sites in Japan, likely to be on the immediate agenda, right locations and the right build- estate. GLP expects the weightings to Where are the biggest pockets of do- Brazil and Europe suited for data Mr Wessel told BT. ings, constructed to a high standard – Mr Wessel on investment managers continue to rise, especially as in- mestic consumption? That’s where centres. Last October, GLP made its foray assets are still at fair value when com- previously focused on hotels or vestors reallocate to logistics and we set our strategy.” GLP’s global footprint has swelled into South-east Asia through a joint pared with interest rates and the al- malls who are eager to get in on data centres and away from retail and In Japan, GLP is thus focused on to 17 countries today, up from eight venture in Vietnam with SEA Logistic ternative segments such as offices, re- the logistics action hospitality, which used to account for Tokyo and Osaka. And in China, op- when it delisted from the Singapore Partners. “We now have five develop- tail properties and hotels,” Mr Wessel about 20-30 per cent. Simultan- tions are aplenty as there are many cit- Exchange in 2018. In that period, it ment sites with a total land area of said in an interview with The Business eously, these investors will try to in- ies with large, dense populations. also more than doubled the size of its about 700,000 sq m, which we plan to Times (BT). markets such as Japan. crease allocations to industrial and di- Helped by huge tailwinds, the team and its assets under manage- seed into our first closed-end club Solid fundamentals also justify GLP anticipates low interest rates, gital infrastructure assets, up from group signed a record 22.7 million ment, to about US$107 billion. partnership in Vietnam,” he said. “very strong” valuations for logistics the current 10-15 per cent or so. square metres (sq m) of leases last Its 2018 privatisation followed a Indonesia is another potential new high overall investor demand and sig- properties, he added. Red-hot de- “If you extrapolate those numbers, year, up 57 per cent from 2019. It also buyout by a consortium led by de- market that the group has always had nificant structural tailwinds to con- mand is vying for scant supply, rents they’ll need more than US$200 billion saw sustained leasing momentum in veloper China Vanke Co and Chinese its eye on. “But it’s a matter of finding are expected to continue growing, tinue buttressing price gains. of logistics or data-centre assets the first half of this year, inking more fund Hillhouse Capital. GLP’s listing the right partner at the right time with and occupancies are hitting the high Some of the cap rates achieved in overnight, and that simply doesn’t ex- than 10.1 million sq m of lease agree- in 2010 was then the largest real es- the right market entry, and we haven’t 90 per cent to 100 per cent range in the market now “have set new bench- ist,” Mr Wessel said. ments, up 14 per cent from H1 2020. tate IPO globally. found that yet”, Mr Wessel said. ASEAN BUSINESS All eyes on dividend Muted launch for South-east Asia’s largest railway station payout By Peter Janssen and 200,000 in the post-Covid period, from banks [email protected] as the route is mostly serving residen- Bangkok tial, suburban areas. in Q2 BANGKOK’S massive Bang Sue Grand There are actually two Red Lines, Station – billed as the largest railway comprising the Dark Red Line from station in South-east Asia – is sched- Bang Sue to Rangsit in northern T Continued from Page 1 uled for a very soft opening on Bangkok, and the Light Red Line from Bang Sue to Taling Chan in western Monday, to be witnessed by thou- “We expect quarter-on-quarter rev- Bangkok. sands of Thais receiving their enue normalisation across the sec- The Red Lines are the first mass Covid-19 vaccinations on the site. tor, as exceptional wealth and treas- rail systems to use Bang Sue as their ury income levels in Q1 2021 ease,” The Red Line, 40 km of elevated central station, and their launch wrote CGS-CIMB research analysts tracks, will launch a free trial passen- marks the first step of transforming Andrea Choong and Lim Siew Khee ger service to the public that links the station into the Thai capital’s in a research note this month. Bangkok’s western and northern sub- main rail transport hub. “For Q2 2021, we think more urbs to the 290,000 square metre Officially launched in March 2007, stable financial markets and corres- Bang Sue Grand Station, which is still Bang Sue Grand Station was designed ponding risk-off sentiment could largely vacant and will remain so for to replace Hua Lamphong Station dampen customer flows.” the foreseeable future. (built in 1916) as the main hub for the Analysts at UOB Kay Hian noted “This is the soft opening. We hope railway’s 4,508 km of track. that the Singapore government’s tar- to have an official opening in Novem- In the future, the four-storey Bang get for three-quarters of its popula- ber, but the date is not fixed yet,” said Sue station will play a more pivotal tion to be fully vaccinated by Octo- Kumpol Boonchom, deputy chief of role as it provides a rail link to Don ber should improve business senti- special projects at the State Railway Mueang Airport, Thailand’s main ter- ment and confidence, ease safe dis- of Thailand (SRT).