DBS, CIMB join chorus of approval for GLP&rsquo s US$1.1bil acquisition

Michelle Zhu

SINGAPORE (Sept 14): DBS Group Research and CIMB are keeping their &ldquo buy&rdquo and &ldquo add&rdquo recommendations on Global Logistic Properties (GLP) at target prices of $2.47 and $2.73 respectively.

The modern logistics facilities provider &ndash which owns US$38 billion ($52 billion) of industrial buildings globally &ndash on Tuesday announced its intention to acquire its third US-based portfolio from real estate agency and property developer, Hillwood Development  Company LLC, for a sum of US$1.1 billion.

Its assets are located in key markets of Dallas, Chicago and Atlanta, which according to Colliers, have one of the brightest outlook for absorption and rental growth in the US.  

GLP will be the asset manager and expects to retain a 10% stake post-syndication, and expects to acquire an initial US$700 million of the portfolio in Dec 16.

(See also:  Global Logistic Properties agrees to buy US warehouses for US$1.1 bil)

The research houses of DBS and CIMB have expressed positivity on the latest announcement, noting a deepening presence of GLP in the US with an expanded portfolio of 17 million sqm, which makes it the second-largest owner and operator of logistics facilities in the US once the purchase is completed.

&ldquo We believe that this acquisition will further strengthen GLP&rsquo s position in the US with a majority of the assets located in key markets where GLP has exposure in,&rdquo says DBS in a Wednesday report. The group&rsquo s yields could rise close to 6% upon the ability to raise portfolio rents nearer to their portfolio average in the medium term, it adds.

In a separate report on Tuesday, CIMB notes the US-based portfolio&rsquo s &ldquo strong exposure to online retail, retail and F& B tenants&rdquo as well as an &ldquo attractive cap rate&rdquo of 5.7% based on its in initial portfolio&rsquo s in-place rent US$4.19 psf per year.

GLP&rsquo s management expects return on equity (ROE) for GLP&rsquo s US$47 million equity stake to be 13% after taking management fees and rental income into consideration, which are in line with CIMB and DBS&rsquo s estimations.

Although both research houses agree this would benefit GLP&rsquo s earnings, they unanimously caution warn that any slowdown in the Chinese economy could affect the group&rsquo s operations in China, which would in turn lead to slower-than-projected revenue growth.

Shares of GLP closed 0.275% higher at $1.83.