The Great Lease of China: GLP's China ventures spawned rocketing new leases

Even occupancy rate rose to 91%.

GLP could well be licking its wounds right now from a 29% drop in profits, but it chose to zero in on its stellar achievements in China.

According to DBS, GLP reported a 20% growth in 4QFY14 revenue to US$150.4m. However, lower fair value gains from associates including a revaluation loss from Brazil and forex losses led to a 29% drop in reported PATMI to US$$160m (US$152m after perpetual securities distributions). 

Here's more from DBS:

For the year, revenue dipped 6.8% to US$598.3m while PATMI (before perpetual capital distributions) inched up 0.1% to US$685.2m. The group has proposed a final S4.5cts DPS.

Operation-wise, China showed the highest new leases tied for the quarter of 1.044msm, +123% yoy, leading to a total take up of 2.3msm for the year. Average rental growth achieved was 5-7% and occupancy rose 3%pt to 91%.

In Japan, leasing momentum continued to be strong with lease rates up 58% yoy to 0.4msm for the year and rents tracking ahead of budget. Brazil saw a 6.3% growth in Q4 rents, with total take up reaching 0.29msm for FY14.

With the recent tie up with strategic partners to establish a China Holdco, forward growth should accelerate from FY16 onwards.

The first tranche of the transaction, valued at US$875m, should be completed in 6 months and the 2nd tranche of US$163m by June 2014.

With strategic access to landholdings and planned acceleration of development activities in China, this should translate to stronger growth momentum in the medium term. It targets to start development on 3.3msm of GFA worth US$1.7b for FY15, up 40% yoy. Land reserves stand at a healthy 12.8msm GFA.

In Japan, it targets development starts of US$675m for FY15, similar to FY14 as appetite for modern logistics warehouse space continues to be fuelled by increased outsourcing activities and obsolescence of old building stock.

Brazil acquisition a new source of income. In addition, the recent purchase of the US$1.4b portfolio of assets in Brazil from BR Properties would double the size of the group’s activities in the country.

GLP intends to fund the acquisition with internal resources, borrowings as well as bringing in other shareholders. The group has gross cash of cUS$1.5b on its balance sheet and a net debt of US$1.1b, equating to a net debt to asset ratio of 9%.