Latin American Warehousing Firm Goes Public in Big Nearshoring Endorsement
LatAm Logistic Properties is going public in a deal valuing the developer of Central and South American industrial logistics real estate at $578 million.
In a blank check merger with special purpose acquisition company (SPAC) Two, the combined company now called Pubco will list its shares on the New York Stock Exchange under the ticker “LLP.”
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The merger comes as companies operating in the U.S. and Canada increasingly extend nearshoring investments in Latin American countries to shorten and diversify their supply chain, work around potential global disruptions or move away from countries like China.
They aren’t just picking one country either. Mexico has usurped China as the top trading partner for the U.S. when looking at exported goods. More than 80 percent of respondents to the USFIA’s Fashion Industry Benchmarking Study said they now source from member countries of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), up from 60 percent in “the past few years.”
“Latin America continues to emerge as an attractive destination for nearshoring due to its close proximity to the U.S., as well as its skilled workforce and cost advantages,” Douglas Kent, executive vice president, corporate and strategic alliances at the Association for Supply Chain Management (ASCM), told Sourcing Journal. “The evidence suggests that nearshoring is actively underway, and Mexico, Costa Rica and Columbia appear to be the largest recipients within the region. The Association for Supply Chain Management’s latest supply chain stability index, developed in collaboration with KPMG, indicated a high growth in road volume crossing into the U.S. across the Laredo, Texas, border.”
LLP’s real estate portfolio includes 28 facilities in Costa Rica, Colombia and Peru spanning roughly 4.8 million square feet of operating gross leasable area (GLA). But its physical footprint has grown at a 30 percent compound annual growth rate (CAGR) since 2019, when total GLA was about 1.9 million square feet.
The company’s real estate is mostly in “high-growth consumption centers with high barriers to entry,” with Ikea, warehouse club PriceSmart and global logistics companies DHL, Expeditors International and Kuehne+Nagel among those occupying LatAm Logistics facilities.
CEO Esteban Saldarriaga told investors that LLP plans to nearly double its GLA in the next few years through the development of owned and future land. It’s also looking to acquire assets in current markets, and expects to occupy as much as 9.1 million square feet of warehouse space.
According to Saldarriaga, LLP expects to expand into markets including Mexico, Ecuador, Chile and the Dominican Republic in the coming years.
“We want to follow our tenants into markets where their respective businesses are growing,” Saldarriaga said. “We want to favor markets with dollar-denominated logistics assets. Lastly, we want to enter markets, where we see a path to achieve a minimum scale of 1 million square feet in about three years after entry.”
Going public in the U.S. gives LLP more exposure to the audience that could power its growth. A major selling point is that 78 percent of the company’s portfolio is directly exposed to the U.S dollar, minimizing potential foreign currency risks for U.S. clients, Saldarriaga said.
Customers are typically multinational and regional companies dedicated to third-party logistics, business-to-business distribution, retail distribution and e-commerce fulfillment centers.
LLP designs and develops properties to offer customers greater accessibility, security, and better cost efficiencies regardless of where they operate. The company’s real estate properties comply with EDGE-certified environmental green building standards. EDGE certification promotes the development of sustainable buildings that conserve at least 20 percent of potable water, electricity consumption and carbon footprint levels compared with conventional facilities.
Latin America has picked up steam among top retail and logistics players looking to expand.
Shein is partnering with 2,000 garment factories in Brazil to localize production in a move that would create 100,000 new jobs over the next three years and amount to a $150 million investment. Reuters reported in May that the ultra-fast-fashion giant is exploring plans to build a factory in Mexico, though Shein neither confirmed nor denied the report.
Target and Columbia Sportswear are among the major U.S. brands that have made substantial commitments to the Latin American supply chain, particularly via sourcing. Target committed to increase its spending by $300 million in El Salvador, Guatemala and Honduras by the end of 2023, and said it would deepen existing relationships with vendors and aim to expand vendor relationships who have a presence in all three countries. Additionally, Columbia Sportswear has committed to purchase up to $200 million in products from northern Central America.
DHL Supply Chain is investing 500 million euros ($545 million) in Latin America by 2028 to expand its regional fulfillment network, decarbonize transportation and develop greener warehouses. The company currently operates 242 warehouses in Latin America covering 3 million square feet.
Another logistics giant, Maersk, is turning to the major markets of Mexico and Brazil to expand further beyond its ocean freight offerings. In April, the Danish firm opened a new Global Service Centre (GSC) in Mexico City to service the Americas region, as well as a dedicated satellite center in city of Santos in Brazil’s southeastern region. This comes after Maersk opened its seventh warehouse in South America’s biggest economy last September.
The nearshoring demand is expected to benefit Latin America’s logistics market. The sector’s $542.4 billion value in 2019 is projected to reach $784.6 billion by 2027, registering a CAGR of 6.2 percent from 2020 to 2027, according to Allied Market Research.
