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The 3 Different Ways Global Logistic Properties Ltd Makes Its Money

Global Logistic Properties Ltd (SGX: MC0) is an owner and developer of modern logistics facilities. It has operations in four countries, namely, China, Brazil, Japan, and the US. The company’s the largest provider of modern logistics facilities in the first three countries and the second largest in the fourth.

In recent months, Global Logistic Properties has been a hot topic in the financial media due to the possibility that it could be acquired. Last Thursday, the company announced that it has received non-binding proposals from several parties and is in discussions with them. Only time will tell if a deal would eventually go through.

But whatever happens, investors who are interested in the company today would still need to understand how exactly Global Logistic Properties makes its dough.

There are three ways that Global Logistic Properties earns money: Fund management, Development, and Operations. Let’s go through each of them.

Fund management

GLP fund management
Source: Global Logistic Properties FY2016 (fiscal year ended 31 March 2016) annual report

What the company does under the fund management business is to raise funds from investors to co-invest in logistics real estate.

There are many benefits that come with this business. For one, Global Logistic Properties can collect asset management fees from the investors it’s working with. These fees usually result in high profit margins.

Moreover, having outside investors provide capital allows Global Logistic Properties to acquire assets that it would otherwise not able to with its own resources. Having the fund management business gives the company the necessary scale to buy initially-out-of-reach assets to improve its network of logistics facilities.

Development

GLP development
Source: Global Logistic Properties FY2016 annual report

Under this business, Global Logistic Properties develops modern logistics facilities (think warehouses) in good locations to cater to the logistical needs of its customers.

This business can in fact be viewed as a traditional property development business, but with a unique focus on modern warehouses.

Operations

GLP operations
Source: Global Logistic Properties FY2016 annual report

With this business, Global Logistic Properties owns a portfolio of logistics facilities across China, Japan, US, and Brazil. According to the company’s FY2016 annual report, this portfolio has 52 million square metres of space (that’s around 560 million square feet) in total.

In addition to leasing its facilities to tenants, Global Logistic Properties also uses its proprietary technology and vast network to help its tenants improve their logistical efficiency. As such, the company claims that it provides solutions and not just real estate space to its tenants.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.