Blackstone, GIC rivalry keeps Indian realty pot boiling

Aggressive acquisitions & deep pockets fuel real estate competition; experts suggest future partnership

The rivalry between Blackstone, a private equity major from the US, and Singapore-based sovereign fund GIC is keeping the real estate sector hot and happening.

A proposed stake sale in the rental arm of DLF is the latest round between the two.

The promoters of DLF are selling a 40 per cent stake in the group’s rental arm, DLF Cyber City Developers. According to people in the know, Blackstone, GIC and a consortium of sovereign funds from Abu Dhabi have emerged as the front runners in the bid. The first two are leading.

When the deal goes through, possibly in September, it could fetch the developer up to ~12,000 crore.

This is not the first time the rivals would face off — they have done so often in the past threefour years.

In March this year, GIC bought a 50 per cent stake in Viviana Mall in Thane, on the outskirts of Mumbai for ~1,000 crore.

“Blackstone, too, had bid for the stake, but did not go ahead with the deal because of some differences with the promoters,” said a source.

The rivals have also locked horns over buying stake in a special economic zone (SEZ) in Pune in 2013, in listed company Nirlon, and 247 Park in Mumbai (see chart).

“There is intense competition between the two, but both are equally aggressive and have deep pockets,” said Ajay Jain, executive director, investment banking, and head, real estate group, Centrum Capital.

A senior executive with a property consultancy, who did not want to be named, said: “Though Blackstone has acquired more assets, GIC is not far behind. On the face of it, Blackstone looks more aggressive but GIC has quietly acquired many marquee assets.”

When the GIC bought Nirlon, which owned the Nirlon IT Park in Mumbai, for ~1,280 crore in 2014, it outbid Blackstone by a narrow margin, another source pointed out. “The difference in cap rates was just 0.5 per cent,” he said.

GIC did not respond to a query emailed by the Business Standard. Blackstone said, “As a matter of policy, we do not offer any comment on media speculations.’’

Blackstone entered real estate sector in the country by acquiring a stake in a realty services company. It is now the largest owner of office assets in the country with a portfolio of 35 million sq ft.

The company has invested about $3 billion (~20,000 crore) in the sector, mostly in FDIcompliant office complexes, which made it the biggest private equity (PE) investor in real estate in the country.

The US PE major manages assets of $93.2 billion in real estate globally, as against $91.5 billion in PE. It managed a $333.9 billion in assets globally as of end-September, 2015.

Blackstone and its partnersEmbassy Group of Bengaluru and Panchshil Realty of Pune have already started the process of consolidating office properties ahead of floating a real estate investment trust (REIT).

Though GIC was conservative in buying real estate till 2014, it invested or committed to invest about $1 billion (~6,700 crore) in the sector in the country since then.

Last year, GIC signed a ~1,990-crore joint venture with DLF to develop two residential projects. It also has joint ventures with the Vatika Group in the National Capital Region and the Brigade group in Bengaluru.

A senior property executive said there is a key difference between GIC and Blackstone.

GIC gets money perpetually from the Singapore government and does not have any pressure to exit. But Blackstone has a fixed fund life and needs to exit after some time.

“It took three to four years for GIC to understand the market here. In the future, it can acquire more as Blackstone exits some of its investments,” said a senior executive, who has worked with GIC in the past.

“In the next two years, competition will increase as more players are coming in. It is better that both players collaborate. There is no point in bidding and increasing the valuation,” he said.