Global Logistic Properties : 3Q FY2017 RESULTS - EARNINGS CALL TRANSCRIPT

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C O R P O R A T E P A R T I C I P A N TS

C O N F E R E N C E C A L L P A R T I C I P A N T S

P R E S E N T A T I O N

Company Disclaimer

The information contained in this transcript is a textual representation of the conference call/webcast of Global Logistic Properties Limited (the "Company") in relation to the Company's unaudited financial statements for the three months ended 30 June 2016. This transcript may be edited for grammar and while efforts are made to provide an accurate transcription, there may be material errors, omissions or inaccuracies in the reporting of the substance of the conference call/webcast. This transcript may not contain, and you may not rely on this transcript as providing, all material information concerning the condition (financial or other), earnings, business affairs, business prospects, properties or results of operations of the Company or its subsidiaries. Please refer to the Company's unaudited financial statements for a complete report of the Company's financial performance and position. None of the Company or any of their members, directors, officers, employees or affiliates nor any other person accepts any liability (in negligence, or otherwise) whatsoever for any loss howsoever arising (including, without limitation for any claim, proceedings, action, suits, losses, expenses, damages or costs) from any use of this transcript or its contents or otherwise arising in connection therewith.

Ladies and gentlemen, thank you for holding and welcome to the Global Logistic Properties conference call. Participants will be in a listen-only mode during the Company's presentation. After the speeches and remarks, there will be a question- and-answer session. Please ask a maximum of two questions and please ask them together.

I would now like to turn our call over to Ms. Ambika Goel, Senior Vice President of Capital Markets and Investor Relations. Please go ahead.

Welcome to GLP's third quarter FY17 earnings briefing. Thanks, everyone, for joining us today. Our presentation material and webcast are both available on our website. Today we will hear from our COO, Steve Schutte, who will provide an overview of our results, as well as an update on the independent strategic review. Steve will be followed by Heather Xie, our CFO, who will run through our financials, and finally Ming Mei, our CEO, will touch on our strategy and outlook.

We will have a Q-and-A session following our presentation. Please ask your questions via phone or through our webcast. Our numbers today are expressed in US dollars and area is referenced in square meters unless otherwise stated. Please understand that we are unable to answer any questions on the strategic review on today's earnings call.

Thank you, and I will now hand it over to Steve.

Thank you, Ambika, and good morning everyone. Thanks for joining us today. We were pleased to report a good set of financial results for the quarter. Core earnings increased 22% year-on-year to $172 million, driven by higher asset values from NOI growth, solid operational performance, and growth in our fund management platform.

Operationally, we had another good quarter across all our markets, where high leasing volume and strong rental rate growth reflect outstanding execution by the team and favorable market conditions.

On the development front, our new developments are proceeding at a healthy pace, in line with our projections, as we continue to maintain sound investment discipline while growing our portfolio, and our fund management business continues to grow in AUM and fees, in a steady and recurring manner. There remains consistent demand for new and existing investors, and we expect this platform to be a key driver of growth going forward.

Now I'd like to spend some time discussing each piece of our business and what we are seeing on the ground. I'll start with operations on slide four.

On the leasing front, we continue to see strong customer demand. For the quarter, we signed 3.3 million square meters of new and renewal leases, which is up 42% year-on-year. To put this in perspective, this is leasing the 127-story Shanghai tower 10 times over, and we did it in the third quarter alone. This volume of leasing actually highlights the strength of our network and how we can leverage it to serve our customers well. It also highlights the key drivers of our growth, namely, domestic consumption and the rise of organized retail.

These positive market fundamentals translated into a high global lease ratio of 92%, rent growth on renewal leases of 6.8%, customer retention of 73%. All of these, led by the efforts of our teams on the ground, resulted in a 6.9% growth in same-property net operating income.

Taking a closer look at operations in China, our lease ratio was stable quarter-on-quarter at 87% after signing 1.9 million square meters of new and renewal leases. We continue to focus on growing NOI and capitalized on positive market conditions to achieve 5.3% rent growth on renewal leases for the quarter.

We see growing demand from the organized retail, auto parts, and cold storage sectors, and remain extremely positive on China's mid- to long-term outlook, with our lease ratio in China expected to remain stable near-term and gradually trend up in the next 12 to 18 months.

In Japan, operating fundamentals remain strong, with rents on renewal leases up 6.6%. Our lease ratio remains high at 97%, despite a short-term spike in market supply. We expect absorption to remain strong and will continue to focus on the core markets of Tokyo and Osaka, which have vacancy rates of less than 5%.

In the US, we continue to see double-digit rental rate growth while maintaining a 94% lease ratio, and in Brazil, we continue our strategy of proactively keeping strong customers, with our portfolio lease ratio unchanged quarter-on-quarter at 89%.

Moving to our development business on slide five.

Customer demand drives our development program. During the quarter, we started $300 million of new developments, while completing roughly the same amount, and capital discipline remains paramount for us throughout the development cycle. Specifically, we look at developing in submarkets with lease ratios of at least 85% and a leasing pipeline of at least

1.5 times. And within these guidelines, we remain on track to meet our FY17 global development starts target of $2.1 billion and completions target of $1.5 billion.

We continue to see development profit as a regular and recurring part of our earnings stream, and we target to generate 20% to 25% margins on development projects upon stabilization. Thus far, we have achieved a 29% margin year to date, and we are ahead of schedule in meeting our full-year development profit target of $200 million. We have recorded $181 million of development profit year to date, which represents 91% of our FY17 target.

Finally, I will touch on fund management on slide six. Our fee generating capital base continues to grow, delivering higher recurring income from management fees. For the quarter, we recognized $45 million of fees from invested capital, which is up 20% year-on-year. Of that, $32 million came from asset management fees, and $13 million were from development and acquisition fees.

As part of GLP's capital recycling policy, we continue to explore all options to expand our fund management platform in new and existing markets. This includes the monetization of stabilized assets.

Today, roughly 67% of GLP's assets are managed in funds, and we expect this percentage to steadily increase as we gravitate further towards an asset-light model.

So all told, it was a great quarter operationally, with growing recurring income from our development and fund management business, and strong leasing with solid NOI growth.

Before I hand it over to Heather to run through the financials, I wanted to address the independent Strategic Review and provide an update on where we are today. In line with our commitment to enhance shareholder value, and as disclosed previously, we are undertaking an independent strategic review of options available. A Special Committee, consisting of four independent directors, is overseeing the Strategic Review, and we have received various non-binding proposals.

As we disclosed last week, Ming is one of the parties which has submitted a proposal, and he has recused himself from all Board discussions and decisions relating to the review. But rest assured, he continues to lead and run GLP's businesses as usual.

I want to stress that no definitive transaction has been entered into, and there is no assurance that any transaction will materialize. We will keep you updated in the event of any material developments and seek your understanding that maintaining confidentiality is key to ensuring that the review is managed fairly and efficiently. We therefore cannot disclose any more details.

While the Special Committee oversees this process, I cannot overstate how focused we are in running the day-to-day business. Our growth plans for the future remain unchanged, and we have more than 1,000 team members, who are some of the best in the business, working hard each day to execute our strategy of being the best operator, creating value