Rebound in China leasing
Rental revenue from China warehouses rose 39% yoy in 2Q14, underpinned by a 6.9% increase in renewal rents. This drove overall revenues up 15% yoy in 1H14, excluding the effect of recent divestments in Japan and exchange rate movements. Same-store NOI growth moderated but stayed a respectable 7.8% yoy. The key positive from this set of results was the strong leasing in China, up 60% yoy and 2.8x qoq to 575k sm. 1H14 new leases of 775k sm are keeping pace with the 1.1m sm of development starts in the period. GLP is confident of meeting its 2.5m sm development starts target for FY14.
Japan rents up 3% yoy
Occupancy in Japan remains stable at 99%, with renewal rents up 3% yoy, the highest rate seen in years. Japan still accounts for 29% of its GAV.
CLF1 the start of recycling engine in China
CLF1 will have an investment capacity of US$3bn at 50% LTV and will be GLP’s vehicle for new logistics development projects in China. GLP will manage the fund and retain 56% stake, allowing it to enjoy development and fee upside (AUM now at US$11.4bn). Asset values in its China portfolio can be crystallised too. GLP will provide a seed portfolio of US$350m (NAV of US$339m). In modern warehouses, GLP is 8x the size of its next competitor. This move should help it pull away from the pack. We expect more funds to come. China makes up 60% of GLP’s GAV.