With the establishment of the first REITs Strategic Placement Fund, China Life Investment is rapidly implementing its related investment plans.
On November 14, China Life Investment and GLP reached a comprehensive strategic partnership, focusing on GLP’s core areas of supply chain, big data, and new energy infrastructure investment and industrial ecosystem development. Notably, the collaboration will involve exploring key regional and market investment opportunities, including the use of innovative financial products such as REITs, to expand the scope and form of investment and financing cooperation.
This move is seen within the industry as a positive signal that the two parties may be preparing to launch new REITs. If successfully implemented, it could become the first project under China Life Investment’s REITs Strategic Placement Fund.
Logistics and Warehousing Investment Initiatives Begin
According to China Life Investment’s plan for the REITs Strategic Placement Fund, the fund will primarily participate in the issuance of public REITs in sectors such as consumer infrastructure, green energy, and high-end logistics. It appears that the fund’s investment focus on the high-end logistics sector may be the first to commence.
Logistics and warehousing have traditionally been active investment areas for insurance capital. Among the 29 publicly listed REITs, GLP REIT, representing warehousing REITs, has become the public REIT with the highest strategic placement by insurance capital. Insurance funds account for 30.17% of its strategic placement, with six of the top ten holders being insurance entities, including Taikang Life, Hengqin Life, Dajia Holdings, New China Life, China Insurance Investment Fund, and Guoren Property & Casualty Insurance.
Analysts believe that logistics and warehousing REITs are favored by insurance capital due to their strong growth potential and stability, which align with the long-term investment needs of insurance funds.
With economic recovery and the rapid development of the e-commerce market, the prospects for logistics real estate continue to improve. A recent report by CBRE noted that the national warehouse rental index is expected to grow by 0.6% in 2023, rising to 1.0% in 2024. First-tier cities, as well as supply-constrained second-tier cities like Dongguan, Hangzhou, and Wuxi, are expected to see annual rent increases of 2%-4%. Meanwhile, the national warehouse vacancy rate is expected to decrease to 13.2% by the end of September, compared to vacancy rates of 15%-20% for commercial real estate such as office buildings.
The continuous rise in operating income will also bring considerable returns to investors. For example, GLP REIT has completed five dividend distributions since its listing, totaling approximately 580 million RMB, with the dividend amount steadily increasing. The first two dividends per share were around 0.05 RMB, rising to over 0.08 RMB from the third distribution onward. Clearly, warehousing REITs are worth investing in.
China Life Investment has likely benefited from its investment in GLP REIT. Although China Life Investment or its major shareholder, China Life, is not listed among the holders, the China Insurance Investment Fund, one of the holders, was jointly established by China Insurance Investment Co., Ltd., China Life Insurance (Group) Company, China Life Insurance Co., Ltd., and China Reinsurance (Group) Corporation.
The collaboration between China Life Investment and GLP in REITs is not just about moving from “behind the scenes” to “center stage” or securing more holdings; it may also involve deeper strategic planning.
Why Choose GLP?
In addition to investing in GLP REIT, China Life Investment has already made several investments in the logistics and warehousing sector. These include:
● Establishing an 1.8 billion RMB private equity fund in partnership with Caixin Life, Manulife-Sinochem, and Cainiao Post, focused on high-standard modern warehousing projects held by Cainiao Network and its affiliates.
● Collaborating with China Merchants Capital and Baowan Logistics on logistics asset acquisitions and mergers.
● Jointly setting up a 10 billion RMB income-enhancing fund with GLP to invest in value-added logistics assets in key cities, participating in strategic investments in GLP, and promoting cold chain logistics center projects.
However, in the aforementioned collaborations, China Life Investment mainly participated as an “investor.”
In March of this year, the Shanghai and Shenzhen stock exchanges released the “Relevant Requirements for Insurance Asset Management Companies Conducting Asset Securitization Business (Trial),” expanding the scope of asset securitization and real estate investment trust fund (REIT) business entities to include insurance asset management companies with sound corporate governance, standardized internal controls, and outstanding asset management capabilities. Since then, insurance capital has transitioned from being an investor to also being an asset securitization manager.
This development means that insurance capital can now work with partners from the inception of REIT projects to identify potential high-quality assets, incubate them, and ultimately bring them to market through REITs. This process also allows China Life Investment to develop a strategic blueprint centered around public REITs.
Currently, the most pressing task for China Life Investment is selecting the right partners and identifying suitable high-quality assets.
GLP China, as the largest provider of warehousing facilities in the country, is an ideal partner, especially given the long-standing cooperation between the two parties. The success of the first GLP REIT has also reinforced China Life Investment’s confidence in GLP’s operational capabilities.
According to disclosures, the infrastructure assets of GLP REIT currently consist of ten warehousing and logistics parks located in key economic regions such as the Beijing-Tianjin-Hebei area, the Yangtze River Delta, the Bohai Rim, the Guangdong-Hong Kong-Macao Greater Bay Area, and the Chengdu-Chongqing Economic Circle. These assets cover a total building area of approximately 1.1566 million square meters.
Recent data shows that the operational performance of these assets remains stable. As of the end of September, the average point-in-time occupancy rate was 88.46%, and the occupancy rate, including leased areas yet to commence, was 90.78%. The effective average rent per square meter per month for contract rent and property management service fees (excluding tax) was 37.72 RMB.
In addition, GLP has a vast portfolio of logistics and warehousing assets, with over 450 logistics and industrial infrastructure facilities in China, covering more than 50 million square meters. This portfolio includes mature assets such as technology parks, data centers, and energy infrastructure, which could be candidates for future listings.
The challenge for China Life Investment and GLP moving forward will be to select the best from a large pool of resources, successfully incubate and operate these assets, and bring them to market through REITs.
The pace of new REIT listings has recently accelerated. Currently, eight products are under review, with more than 100 reserve projects in the pipeline. The REITs market is expected to expand further in both scale and scope. The market is already anticipating further advancements from GLP in the REITs space.
