Blackstone, Indiabulls plan commercial real estate platform
BENGALURU: Barely three months after striking a joint venture, private equity (PE) firm Blackstone Group Lp and Indiabulls Real Estate Ltd (IBREL) plan to develop it into a commercial properties platform with rentyielding assets, said one person familiar with the development.
The plan is to add six office assets on the platform within the next three to six months, of which three will be jointly acquired and the remaining would comprise projects already being developed by IBREL.
“The properties are going to be in Mumbai and NCR (National Capital Region) and the idea is to bring assets with annuity income under the joint venture,” the person said, requesting anonymity.
In March, Blackstone had bought a 50% stake in IBREL’S office properties, One Indiabulls and Indiabulls Finance Center, in central Mumbai for $730 million (₹ 4,750 crore).
IBREL will not pursue its earlier plan to carve out a separate entity for its commercial office business, given its new partnership with Blackstone. In 2017, the company’s board had decided to create a new vertical to house the two businesses, where the residential business would continue to remain with IBREL and the new entity—indiabulls Commercial Assets Ltd (IBCAL)— would hold existing leasing and commercial assets, as well as future projects.
“Instead of IBCAL, the plat- form with Blackstone will house the office assets. Investment decisions to sell will be taken by IBREL, while buying decisions will be taken by the Blackstone board. At some point in time, the partners may consider to list the assets as a REIT (real estate investment trust) depending on how the REIT model plays out in India,” the person added.
When contacted, Blackstone declined to comment.
In recent months, Indiabulls has been steadily building its rental office portfolio in NCR and Mumbai. IBREL, through a subsidiary, had entered into an agreement to acquire a newlyconstructed commercial build- ing with leasable area of about 250,000 sq. ft in Gurugram. The company was also looking to acquire a commercial building at Udyog Vihar, Gurugram, for ₹ 150 crore. Indiabulls Infraestate Ltd, a subsidiary of IBREL, had signed a term-sheet with Oricon Enterprises Ltd to jointly develop a commercial building on a land parcel in Worli, Mumbai. Once executed, Indiabulls would get ownership rights to about 255,000 sq. ft of leasable area. IBREL expects to enhance its annuity revenue to ₹ 1,547 crore by 2020-21 from the rental properties portfolio, including the rental portfolio of its 50:50 JV with Blackstone. The Mumbaibased developer has also taken strategic calls to streamline its real estate portfolio.
In May, IBREL had sold off its 1.9 million sq. ft office park, One Indiabulls Park, in Chennai to Blackstone in an outright deal for ₹ 900 crore. It was part of its plan to exit the southern city, a non-core market for the company’s business. It had also sold its residential township project, Indiabulls Greens, in Chennai to Bengaluru-based Ozone Group for ₹ 285 crore.
“Blackstone’s strategy i n India has been to grow through partnerships and it makes sense to have regional partners. The NCR office market is clocking healthy absorption with 7.5-8 million sq. ft being leased every year, and has space to expand,” said Rajeev Bairathi, executive director and head of capital markets, at property advisory Knight Frank India.
“With REITS having the ability to deliver double-digit returns through a mix of dividend yield and capital appreciation, India’s current Grade A office stock of 454 million sq. ft presents a large opportunity,” said a recent ICICI Securities report. MUMBAI: Mumbai-based retail developer Phoenix Mills Ltd on Friday said it has acquired an under-construction mall at Indore for Rs234 crore—its second such purchase in a Tier II city in less than a month.
Earlier this month, the company announced the acquisition of an under-construction mall in Lucknow for Rs453 crore.
The Indore property, which has a gross leasing area of 1.1 million sq. ft, was acquired through Insight Hotels & Leisure Pvt. Ltd, a subsidiary of Phoenix Mills, in an auction conducted by an asset reconstruction company, the developer said in a filing to BSE.
The company said it would develop the asset as Phoenix Marketcity Indore, which would be operational by the end of fiscal 2021. So far 80% of the construction is complete. The company also plans to develop another 800,000 sq. ft of gross leasing area at a later stage, it said . “Indore is an under-served market for quality retail and entertainment experiences while the population has a high propensity to spend. Given that Indore does not have large format retail centres and has lim- ited options to socialise, Phoenix Marketcity Indore will be a marquee retail destination that Indore deserves,” said Shishir Shrivastava, joint managing director, Phoenix Mills.
The acquisition is in line with the company’s plan to expand its retail portfolio to 11-12 million sq. ft from the existing 6 million sq. ft, he said. “With acquisitions of two land parcels in Pune and Bengaluru and two brownfield acquisitions in Lucknow and Indore, we will add approximately 4 million sq. ft of retail space to our portfolio,” he said. In April 2017, Phoenix Mills and Canada Pension Plan Investment Board (CPPIB) announced that the latter will invest $250 million to own up to 49% in Island Star Mall Developers, a unit of the developer.
Island Star Mall Developers owns Phoenix Marketcity in Bengaluru, a mall with gross leasable area of 1 million sq. ft. The investment platform was created to ramp up its retail business and expand to other cities. At present, Phoenix Mills has a presence in Mumbai, Pune, Bengaluru, Lucknow, Chennai and Bareilly.
Since the CPPIB tie-up, Island Star has bought two land parcels each in Pune and Bengaluru.
ADDITION The two firms plan to add six office spaces on the new realty platform