Realtors rope in global firms to boost image

The country’s local property developers are roping in global real estate developers as development management partners in office properties to attract international tenants and investors.

In development management, while the land owner is responsible for approvals and other pre-construction procedures, the other partner takes care of construction, marketing, leasing, and so on for a fee.

So far, development management was mostly happening in residential properties, but now, it is being adopted by commercial property developers also. Developers used to charge 12-15 per cent of the top line of projects as a fee in residential projects.

Recently Bengaluru-based DNR group tied up with Hines, one of the largest global developers cum investors from the US, to do a one million square feet office project in Bengaluru.

“It will bring international flavour to the project and they also have relations with multi-national firms, which helps us in leasing the project,” said Vipul Kumat, managing director, DNR Group.

Kumat said his company was also exploring some other projects with Hines in Bengaluru.

Amit Diwan, managing director & India country head, Hines, said: “We see development management as a way of expanding our participation in India and entering new geographies. We would be open to investing in these projects as well, but that’s a decision project owners have to make for themselves based on their desired capital stack.”

He said Hines had signed two agreements so far, and has some more at term sheet stage. However, he declined to name the developers due to confidentiality clauses.

According to sources, Hines signed a development management deal with Navi Mumbai-based developer Greenscape and is doing a one million sq. ft office project with them in Thurbe area of the satellite city.

Tishman Speyer, another Us-based developer cum investor, has tied up with Pune-based Muttha group for a 1 million sq. ft deal last year. The entire project has an area of 4.5 million sq. ft.

Tishman is also in talks to do 3.2 million sq. ft in two different projects in Pune, one of which is a built to suit for a large tenant, sources said.

“Global development management partners help local realtors to compete with top developers and help them in financial closure of projects,” said a senior executive who has dealt with Tishman in the past. Tishman could not be contacted for comments

Tishman also acted as a construction manager for Goldman Sachs for a 1.5 million sq. ft project in Bengaluru earlier.

Besides, it is doing 1 million sq. ft for Morgan Stanley, which has recently taken the space from Oberoi Realty in Mumbai. Tishman is also doing development management for a local Bengaluru developer for a 1.4 million sq. ft project in Hebbal area of Bengaluru.

Saurabh Shatdal, managing director, capital market and land at Cushman & Wakefield, said: “Developers want to hold land rather than doing joint ventures. But they want to attract Fortune 500 companies. If they want to sell, they can get good investors due to good tenant base and good building.” Shatdal said Cushman acted as a consultant in many such deals recently.

“Either land owner gives a development management contract to an outside company or a joint venture company gives such a contract to the construction arm of a local developer,” he said.