For­eign, do­mes­tic in­vestors tar­get com­mer­cial real es­tate

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Mad­hurima Nandy mad­hurima.n@livemint.com

BENGALURU: Fundrais­ing and in­vest­ments in In­dia’s of­fice space sec­tor are ex­pected to hit a peak as lo­cal de­vel­op­ers and for­eign in­vestors ex­pand their port­fo­lios through fresh in­vest­ments and ac­qui­si­tions or launch real es­tate in­vest­ment trusts (REITs) to mon­e­tise ex­ist­ing port­fo­lios.

Thus far in 2017, more than $2 bil­lion worth of for­eign in­vest­ment deals in com­mer­cial real es­tate have been closed—mainly to ac­quire stakes in projects and com­pa­nies. An­other $1.4 bil­lion of for­eign in­vest­ment is ex­pected, to build and ac­quire of­fice as­sets, and a fur­ther ₹3,200 crore is be­ing raised by do­mes­tic funds to buy of­fice projects. In­dia’s first REIT will also be launched by the end of the year and raise ₹6,000 crore.

In Au­gust, In­dia’s largest listed real es­tate firm DLF Ltd said its pro­mot­ers would sell their stake in its ren­tal arm for ₹11,900 crore (the deal in­volves sell­ing a 33.34% stake to an af­fil­i­ate of GIC Real Es­tate, Sin­ga­pore, for ₹8,900 crore and the buy­back of pref­er­ence shares for an­other ₹3,000 crore), in what is per­haps the largest for­eign di­rect in­vest­ment in the sec­tor.

“We have cre­ated a pri­vate trust and the idea is to grow the port­fo­lio (cur­rently 26.9 mil­lion sq. ft), which has the po­ten­tial to be dou­bled,” said Sau­rabh Chawla, se­nior ex­ec­u­tive di­rec­tor-fi­nance, DLF.

Em­bassy Of­fice Parks, a part­ner­ship be­tween realty firm Em­bassy Group and in­vestor Black­stone Group Lp, will launch its REIT by De­cem­ber to mon­e­tize its port­fo­lio.

The part­ners plan to file a draft red her­ring prospec­tus by the end of Septem­ber, Em­bassy chair­man Jitu Vir­wani said.

The Em­bassy REIT, which aims to raise around₹6,000 crore, was the first one to be ac­corded reg­is­tra­tion with the Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) in July.

The suc­cess of the Em­bassy-Black­stone REIT is cru­cial be­cause it will lend con­fi­dence to other in­vestors and de­vel­op­ers eye­ing REITs.

Mean­while, other com­pa­nies and funds are plan­ning to ex­pand their pres­ence or build their port­fo­lios.

RMZ Corp. is strength­en­ing its po­si­tion as a prom­i­nent “Grade A” com­mer­cial of­fice space provider by strength­en­ing its pres­ence across im­por­tant cities. Xan­der Group Inc. plans to ramp up its of­fice port­fo­lio af­ter hav­ing in­vested more than $400 mil­lion al­ready.

Three fac­tors are driv­ing in­ter­est in com­mer­cial real es­tate-de­mand, while lower than last year, is still high enough; rents have been steady; and there’s a short­age of pre­mium of­fice space in the big cities.

Sup­ply of of­fice space across eight ma­jor cities fell by nearly 50% in the first half of 2017, com­pared with the same pe­riod last year, prop­erty con­sul­tant Cush­man and Wake­field said in its half yearly re­port in July.

It termed the fall in sup­ply “one of the big­gest de­clines in the last five years”.

Black­stone bought around a 15% stake in var­i­ous of­fice projects of K Ra­heja Corp. for around $250-300 mil­lion this year. K Ra­heja Corp. has 20 mil­lion sq. ft of of­fice space earn­ing rent, and plans to add an­other 15 mil­lion and may go the RE IT way in the fu­ture.

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