Global Logistics Properties may spin off a real estate investment trust (REIT) to monetise its assets, specifically completed properties in Japan.
“We are always exploring that option,” said Ming Z Mei, chief executive of Global Logistics in an interview with The Business Times. “When the market is ready, we will look at either the Reit or private fund structures so that we can recycle the capital to invest in higher-return markets.”
However, the company is not in a hurry, as strong operational cashflows and proceeds from its initial public offering (IPO) are enough to support existing expansion plans for the next 3-4 years, added Mr. Mei.
This week, the key logistic player in China and Japan launched a $3.9 billion IPO, closely matching Singapore’s biggest-ever IPO by SingTel, which raised more than $4 billion in 1993.
Global Logistics will also consider a private development fund in Japan with institutional investors in 2011 to purchase land, develop and lease them, which will likely open another avenue of stable fee income for the company, said Mr. Mei.
The company’s Japan business is considered less attractive than its China counterpart. However, Mr. Mei stressed that despite Japan’s dismal GDP figures, the group still recorded a compounded annual growth rate of 42.9 percent in gross floor area in the past five years. The pressure on margins is also prompting companies in Japan to outsource their logistics requirements, thus, boosting demand for services offered by Global Logistics.
Analysts believe that while business in Japan is flattening out, it still provides stable cashflows that can be used to fund the company’s expansion in China. “From a yield perspective, it is more attractive if their completed assets are in the form of a Reit,” said Janice Ding, an analyst at CIMB.
Another analyst also noted that a REIT prospect is a catalyst for Global Holdings.