CIC and GLP, whose largest shareholder is Singapore wealth fund GIC, will each take a 50 percent stake in a joint venture that will buy the properties from LaSalle Investment Management. The deal is the largest real estate transaction in Japan this year.
"This is the first ever transaction of real estate investment for CIC in Japan. So for them to pick us as a partner as well as an operator, that shows that they are committed and also confident in us," said GLP CEO Ming Z Mei.
"Demand for quality modern warehouse space is on the rise, while there remains a lack of supply of modern warehouse," he said of the Japanese real estate market.
Activity in Japan's real estate market picked up in the third quarter, following a slowdown caused by the earthquake and tsumani that hit the country earlier this year. Japan is now one of the top targets for property funds over the next 12 months, according to big name players such as Deutsche Bank's RREEF and GE Capital.
Australia's Goodman Group, a developer of warehouse and industrial space backed by CIC, has also announced plans to invest in Japan.
Industry sources told Reuters the talks between GLP and LaSalle had been ongoing since July, and that the property fund manager had initially wanted $1.8 billion for a portfolio of 17 properties.
In its filing to the Singapore stock exchange on Monday, GLP said the portfolio contains 770,989 square metres of gross floor area, of which more than 90 percent is located in Greater Tokyo and Osaka.
Assuming the transaction had been completed before April 1, 2010, the deal would have lifted after-tax profit for the financial year ended March 2011 by around $38 million, the Singapore firm said.
Big in Japan
The GLP-LaSalle deal is the largest property transaction in Japan this year recorded by Real Capital Analytics (RCA). The next biggest transaction took place in March when Mitsubishi Estate paid Lone Star $1.1 billion for two large office buildings in Tokyo.
The deal also marks a dramatic escalation of investment activity by GLP, which this year had spent $402 million on sites in Beijing and $109 million on sites elsewhere in China, according to RCA data.
The amount of property investment into Japan by Chinese companies has been negligible this year, with only one property deal worth $7 million.
In contrast, Singaporean companies including Keppel Land
and Mapletree Logistics Trust have been the second-largest source of capital into Japanese property this year, behind the United States, according to RCA.
Japan Reit
GLP currently owns, manages and leases out 380 properties in 133 logistic parks spread across 28 major cities in China and Japan. The Singapore firm is planning to list its Japan assets in an initial public offering that could raise as much as $1.3 billion, sources have told Reuters.
"It's something that we continue to explore... That's a very strong opportunity for us when the market is right," GLP Deputy Chairman Jeffrey Schwartz said when asked about the Japan REIT listing.
Ng Kian Teck, lead analyst at SIAS Research in Singapore, said the transaction showed the ability of sovereign wealth funds and the entities they back to make large investments in uncertain times.
"GLP probably have to build up their base of assets in Japan before they actually proceed to do a separate listing," Ng added.
The GLP-CIC joint venture has agreed with a group of domestic Japanese banks for debt financing of $1.0 billion.
GLP will fund its equity commitment of $272.9 million from internal capital and will act as the asset manager of the properties. (Reuters)
