GIC, Blackstone property talks break down over pricing

Blackstone wanted $1.52 b for the properties with 26 million sq ft leasable area

Talks between the Singapore sovereign wealth fund, GIC, and global asset manager Blackstone Inc for a property sale broke down over valuation issues as the former was not prepared to meet the price the latter had set. Sources said that both the parties have walked away from the deal as they could not agree on the pricing.

Blackstone had put on the block half the stake in some commercial real estate assets that it owns jointly with the Panchshil Group and Salarpuria Sattva at an asking price of $1.52 billion.

REIT, THE ONLY OPTION

This has left Blackstone with little option but to launch a REIT for its office properties housed under Nucleus Office Parks and the two joint ventures, sources said. The sources indicated that Blackstone has firmed up its plans to launch a REIT in the region of $1 billion as public markets are trading better than private markets. Blackstone is in the process of   identifying investment bankers to the issue.

Neither Blackstone nor GIC responded to businessline’s requests for clarification in the matter.

Last year, businessline had reported that discussions between the two were under way and a decision would be taken based on the pricing and valuation of assets.

HIGH VALUATIONS

Singaporebased GIC is one of the few overseas funds that still invests in the Indian commercial realty market. However, it has balked at the asking price of $1.52 billion for the Blackstone properties, sources with knowledge of the developments said. The deal pricing would have valued the properties at around $4 billion.

Properties that are part of the sale have a leasable area of 26 million square feet (msf). Projects with Panchshil include Eon Free Zone, Tech Park One, a 415key JW Marriott hotel, and Pavilion Mall. Projects with Salarpuria in Hyderabad that are up for sale are Knowledge City and Knowledge Capital.

The joint ventures have been in effect for 710 years and sources said Blackstone is under pressure from its global investors for payback. The usual period for investments that private equity firms like Blackstone follow is 57 years after which they monetise their investments either through a sale or a listing.

Blackstone owns over 20 msf of commercial assets in Nucleus Office Parks. Combined with its joint venture assets, it has over 46 msf of real estate. This will be part of Blackstone’s REIT portfolio, on which work is apace.

REITS ON THE RISE

The December quarter saw a spurt in office absorption and 2023 ended with gross absorption of close to 60 million square feet, and is forecast to cross 50 msf this year.

Also, REITs have shown an improved performance in the markets. Blackstoneowned Nexus Select Trust has gained 23 per cent from its 52week low, while Embassy Office Parks REIT, in which Blackstone was a sponsor and exited in December, has surged over 40 per cent.

Market circles said Global Capability Centres are continuing their job flow to India, so the commercial real estate story is strong for another 810 years horizon.