Source of this article: Times Finance Author: Lin Xinlin
Vanke, a leading domestic real estate company, may add a logistics sector to the list of asset disposal.
Image source: Picture Worm Creative
On April 17, Bloomberg, citing people familiar with the matter, reported that Vanke was seeking to sell its entire stake in GLP, a real estate logistics company, to raise funds to deal with liquidity pressures. According to the source, Vanke has approached potential buyers, including Guangdong Holdings, a state-owned company backed by Guangdong Province, and another Tianjin state-owned enterprise, on the transfer of its 21.4% stake in GLP, but no agreement has yet been reached.
Since the joint consortium privatized GLP for tens of billions of yuan in 2018, Vanke and the global logistics real estate investment giant have been working together for nearly six years. On April 18, Times Finance asked Vanke Group and Wanwei Logistics for confirmation on the sale, and both said that there was no more information to disclose.
After 6 years of holding hands with GLP, Vanke also had logistics ambitions
Vanke has been planning logistics real estate for 10 years.
On the road of this real estate developer to develop logistics real estate, the logistics giant GLP is indispensable. In 2014, Vanke invited Mei Zhiming, then CEO of GLP, to give a lecture at the headquarters to talk about the future development prospects of China's warehousing and logistics. In the following year, Vanke officially entered the logistics real estate industry and launched a new brand "Wanwei".
After two years of exploration, Vanke announced in July 2017 that it had formed a consortium with Hopu, Hillhouse Capital, SMG and Bank of China Investment to participate in the privatization of GLP, a company listed on the Singapore Exchange, with a total valuation of about S$16 billion, or about RMB 79 billion, showing its logistics ambitions.
At that time, GLP owned and managed a portfolio of modern logistics facilities in China, Japan, the United States and Brazil, with approximately 55 million square meters of logistics real estate and total assets of more than US$42 billion. More than 30% of the logistics area is located in China, and its share of the market is almost equal to that of the 2nd to 10th places combined.
For Vanke, whose logistics business is just starting, the acquisition of GLP can form a synergistic effect with it, and make use of GLP's huge logistics and warehousing network and management capabilities to improve its own layout and quickly make large-scale plates.
Yu Liang, chairman of the board of directors, who had just taken over from Wang Shi at that time, publicly stated that Vanke's logistics real estate is currently ranked fourth or fifth in the industry, but after combining with GLP, it will pursue to become the first in the country and even the world.
In January 2018, the privatization of GLP was completed, and Vanke invested 15.733 billion yuan, holding 21.4% of the shares, making it the single largest holder. With this, Vanke also has two trump cards in the field of logistics real estate.
However, Wanwei Logistics and GLP did not merge, but developed synergistically with Vanke as a joint shareholder. The development model is also slightly different, GLP focuses on property development, operation management, fund management and logistics financial platform to build an all-round logistics industry ecosystem, while Wanwei Logistics focuses more on the development of high-standard warehousing and cold chain logistics.
According to the financial report, in 2023, Wanwei Logistics will achieve operating income of 4.18 billion yuan, a year-on-year increase of 17.2%, of which the operating income of high-standard warehouses will be 2.30 billion yuan, and the operating income of cold chain will be 1.88 billion yuan.
GLP, on the other hand, has been involved in sale rumors for nearly a year. In May last year, GLP said in a conference call that it was signing a memorandum of understanding with an investor on the sale of some Chinese assets, and planned to use the proceeds from the sale of assets to reduce the company's leverage ratio and buy back debt. At the media conference in October, Yu Liang said in response to the news, "Vanke is only a financial investment and will not interfere with it, we are very optimistic about GLP, and we are also optimistic about their team." ”
However, in March this year, there was market news that Vanke planned to sell GLP's shares. On April 14, at the investor relations meeting held by Vanke, Yu Liang said that Vanke did have problems such as too large and hasty diversification business, exceeding the ability to match resources, occupying too much development business funds, and failing to keep up with management capabilities due to excessive scale.
In the past few months, Vanke has made a number of asset disposals, including the sale of its stakes in Guangzhou Tianhe Vanke Plaza and Banyan Tree Hotel, and a 50% stake in Shanghai Qibao Vanke Plaza.
The logistics market is under pressure, and asset packages are being put up for sale
"It is not surprising that the disposal of assets by developers has been the theme of recent years. An unnamed person in the logistics industry told Times Finance that Vanke's motivation for selling GLP may be mainly due to the maturity pressure of its own dollar bonds, as well as the current warehousing and logistics market is in the adjustment of considerations.
In the past year, the national logistics real estate market has been under pressure, with the supply of high-standard warehouses continuing to grow but the demand recovery momentum insufficient, and the overall vacancy rate has risen and rents have declined.
In order to increase the occupancy rate, many landlords have adopted the leasing method of "price for volume", which has put pressure on rental performance. Among the 24 high-standard logistics and warehousing markets that Jones Lang LaSalle regularly tracks, 16 markets recorded negative year-on-year average rent growth in the fourth quarter.
Rent reductions are also occurring in GLP's logistics projects.
According to the annual report of Zhongjin Prologis REIT, in 2023, the operating income will be about 430 million yuan, a year-on-year increase of 19.7%, and the net profit will be 23.88 million yuan, a year-on-year decrease of 20.1%. CICC Prologis REIT pointed out that the main reason for the decline in the company's performance is the change in the market situation. According to public information, after the expansion last year, the fund consisted of 10 warehousing and logistics parks, and the effective average rental unit price as of the end of the period was 37.73 yuan/square meter/month, compared with 44.43 yuan/square meter/month at the end of the previous year.
"The logistics real estate market has been going up in the past decade, with rising rents, falling vacancy rates, and optimistic funds, but since 2022, there has been an inflection point. According to data provided by Su Zhiyuan, managing director of Cushman & Wakefield and head of the industrial real estate department in China, in the first quarter of this year, the average rent of high-standard warehouses in the country was 32.2 yuan/square meter/month, and the vacancy rate was 16.6%, while in the first quarter of last year, the rent was 33.7 yuan/square meter/month, and the vacancy rate was 15.7%. ”
At present, in addition to the Pearl River Delta region, the market performance of Beijing-Tianjin-Hebei, Yangtze River Delta, Chengdu-Chongqing and other regions is weak, and the pressure of decentralization is emerging. Su Zhiyuan pointed out that since cross-border e-commerce generally uses South China as a pre-warehouse area for going to sea, rents in this area have been relatively stable and slightly rising, while most other areas are in a downward trend in rents.
CBRE data also shows that the vacancy rate of Guangzhou's high-quality storage facilities in the first quarter was no higher than 5.0% for three consecutive quarters, and the rent increased by 39.2 yuan/square meter/month, higher than the national average. However, the above-mentioned logistics industry people said that in addition to cross-border e-commerce, the demand for warehousing in other industries has weakened, coupled with the high supply, the logistics rent prospects in Guangzhou-Foshan area are not very optimistic.
Su Zhiyuan pointed out that the downward trend of the logistics market is affected by macroeconomic and other factors, including domestic and foreign demand, import and export, traditional e-commerce performance, etc., "It is expected that it will continue for a certain period of time to usher in a rebound, and the development of the logistics market generally lags behind the macroeconomic market for about a year." ”
Under the pressure of the market, some investors have also begun to sell off their assets. In November 2023, it was reported that Blackstone Group is seeking to sell its logistics asset portfolio in China, including 11 logistics park projects with a total price of more than 10 billion yuan, and the largest of the assets to be sold is Longdi Guangzhou Airport Logistics Park, formerly known as R&F's integrated logistics park.
"Starting from the second half of 2023, there will be a large number of high-standard warehouse logistics asset packages on the market seeking to sell, at least more than a dozen. Su Zhiyuan explained to Times Finance that many domestic logistics assets are held by overseas funds, most of which have their own strict profit return indicators, and if the rent continues to decline, the profit target may not be achieved, and these investors will quickly exit in the short term.
This trend may further affect the performance of warehousing REITs. Since the beginning of this year, the price of a number of warehousing and logistics REITs has declined. "The trend of declining rents will have an impact on the price of REITs, and assuming that the market continues to decline in the future, REITs will be more cautious in reviewing the issuance and pricing. Su Zhiyuan said.