|03 June, 2019

Blackstone deal stacks GLP closer to China IPO

The buyout giant’s logic is clear: e-commerce is booming and the United States remains a leading market

The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. Image used for illustrative purposes

The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. Image used for illustrative purposes

REUTERS/Brendan McDermid

HONG KONG  - Blackstone’s latest deal stacks GLP closer to a China spinoff. The private equity outfit will buy $18.7 billion of U.S. properties from funds managed by the Singapore-based warehouse group. GLP can now concentrate on a bigger package, its portfolio in the People's Republic. A rival’s imminent listing could help speed up that delivery too.

The buyout giant’s logic is clear: e-commerce is booming and the United States remains a leading market, with online shopping sales hitting nearly $140 billion in the first three months of this year, up almost 4% from the previous quarter, according to official figures. Warehouse operators are struggling to keep up, helping the shares of logistics companies like Prologis, which trades at roughly twice its forward book value. All of that makes the sector appealing to Blackstone: it will acquire 179 million square feet of properties from three funds managed by GLP, which will retain just 8 million of square feet of properties in the United States. With Amazon, GLP’s biggest tenant, reporting surging earnings, there should be further upside.

Yet the real value for GLP is not the United States, where it owns only a fraction of what it manages, but China. In the People’s Republic, the company stakes a claim to 400 million square feet of property, which it either owns or manages through funds. The lack of snazzy godowns there is even more pronounced than in the United States, exacerbated by e-commerce titans like Alibaba and JD.com. Large portfolios of such properties are few and far between, too, suggesting a bubble-wrapped valuation, especially if sold in the home market.

A deal could be packaged up soon. ESR, a company backed by Warburg Pincus that also develops and manages warehouses for e-commerce companies in the mainland, is planning a Hong Kong float. Trade tensions have prompted ESR and its bankers to delay the IPO launch, Reuters has reported, but an offering could come later this week. The sale of its second-biggest portfolio to Blackstone has shown GLP to be an opportunistic seller. If ESR’s float is successful, China could be next in the unloading bay.

On Twitter https://twitter.com/AlecMac11

CONTEXT NEWS

- New York-based investment firm Blackstone Group is buying a portfolio of U.S. industrial properties from three funds managed by Singapore-based logistics company GLP for $18.7 billion, Blackstone said in a statement on June 3.

- Citigroup and Goldman Sachs advised GLP on the transaction. Bank of America Merrill Lynch, Barclays, Deutsche Bank, JPMorgan and Morgan Stanley advised Blackstone.

- For previous columns by the author, Reuters customers can click on MAC/

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Clara Ferreira Marques and Katrina Hamlin) ((alec.macfarlane@thomsonreuters.com; Reuters Messaging: alec.macfarlane.thomsonreuters.com@reuters.net))

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