Singapore’s GLP will do something it has never done before with this US$1.6 billion private equity fund

Asia’s biggest warehouse operator, GLP, has established a 10 billion yuan (US$1.6 billion) private equity fund in China, in line with its strategy to pioneer a “technology-led logistics ecosystem”, according to a company statement.

The Hidden Hill Modern Logistics Private Equity Fund will be GLP’s first fund investing in a sector other than real estate. Investors in the fund include institutional investors and insurance companies, including China Post Capital.

“The fund will invest in adjacent growth sectors that complement GLP’s real estate business, with a focus on companies employing technology to enhance efficiency in the logistics industry,” said Ming Mei, co-founder and CEO of GLP in a statement.

Earlier this year, Alibaba Group said its Cainiao logistics unit is working on driverless vehicle technology as part of its drive to improve its courier services following JD.com’s decision to use self-driving vans to deliver orders by June in Tianjin.

GLP has US$50 billion of assets under management, with a real estate portfolio spanning 62 million square metres across eight countries.

GLP was privatised in a management buyout in January for US$11.6 billion, reflecting the biggest-ever private equity acquisition by value. GLP delisted from the Singapore stock exchange in January following the privatisation.

The private equity consortium was comprised of Hopu Investment Management, Hillhouse Capital Group, real estate developer Vanke Group and the financial service investment arm of Bank of China, which was backed by GLP CEO Ming.

Singapore’s sovereign wealth fund GIC, which owns 37 per cent of GLP and is its biggest shareholder, was said to support the transaction.

Logistics companies have been facing intense competition from new players from the e-commerce market. That has driven logistics players to increasingly deploy technology to control costs and improve services.

In January, global rating agency Moody’s Investor Services downgraded GLP by one notch to Baa3, citing concerns over the company’s financial risk.

Moody’s said GLP’s debt leverage ratio will rise to 13-14 times for the financial year ending March 31 2018, from 10 times for the year ended September 2017. The rating agency said the company’s debt had risen since privatisation amid acquisitions that included European logistics portfolio, Gazeley.

In addition GLP’s initiative to develop its China financial services income segment was considered a negative for its credit ratings, Moody’s added.

GLP said its revenue increased by 13 per cent to US$880 million for the year ended March 31, 2017 as compared to US$777 million a year earlier, primarily attributable to higher fund management fee income, completion of projects in China and revenue from financial services in China.

Alibaba is the owner of the South China Morning Post.