CapitaLand, Xander vie for IT parks
prime rental asset class.
Blackstone declined to comment on its India portfolio and strategy.
Jitu Virwani, chairman and managing director, Embassy Group, one of Blackstone’s first developer partners here, said Blackstone has deep understanding of the real estate business in India, including the approval process and other legalities.
In July 2017, Embassy Office Parks real estate investment trust (REIT) was registered with the Securities and Exchange Board of India (Sebi), making it the first such realty trust in the country to be accorded registration by the market regulator. The draft red herring prospectus is expected be filed before Mayend.
“The REIT will see Blackstone stepping in as a sponsor and will see them monetising part of their commercial portfolio and realizing its value,” Virwani said.
Embassy Office Parks, which includes Embassy Manyata Business Park and Embassy GolfLinks in Bengaluru, is an i nvestment partnership between Embassy Group and Blackstone, along with other stakeholders. Globally, Blackstone has around $115 billion of assets under management and in February, Ken Caplan and Kathleen McCarthy were named as global co-heads of real estate. Senior managing partner Tuhin Parikh has built the firm’s real estate investment portfolio in India from the start. From building an office asset base, Blackstone started buying shopping malls in 2015 and set up its India subsidiary Nexus Malls in 2016 to own and manage the malls here.
Between 2017 and now, Nexus Malls has increased its portfolio from 2.8 million sq. ft to 5 million sq. ft across eight malls.
Despite the ongoing slowdown in the residential sector, the commercial real estate space has seen unabated interest from marque global investors.
JLL India in February estimated that net absorption of office space to cross 100 million sq. ft by end of 2020 in the top eight cities of India.
“The office space market has been experiencing robust demand trends which will be fructified in the next 2 -3 years keeping the office leasing activities buoyant and in an upward movement,” it said.
In commercial real estate, Blackstone has faced competition from Singapore’s sovereign wealth fund GIC Pte. Ltd, with both of them often vying for the same deals.
According to analyst esti- mates, GIC has invested more than $3.5 billion in office, residential and shopping malls. In a single investment, last year, promoters of DLF sold their 33.34% stake in its rental arm to GIC for around Rs8,900 crore.
“The key different between GIC and Blackstone would be the operational expertise of the latter and the strong partnerships it has forged,” said an investor, requesting not to be named.
“Blackstone was clearly an early mover which saw the potential in commercial real estate ahead of its time. What now needs to be seen is how well they monetise these assets. But investments by the likes of Blackstone have sent out the message loud and clear to other global investors that investing in India is a long haul and one needs to be patient and focused,” said Shashank Jain, partner, transaction services, PwC India. MUMBAI: Singapore-basedleading real estate companyCapitaLand Ltd and global investment firm The Xander Group Inc. are the front runners to acquire Punebased IT Parks, which is owned by US fund The Blackstone Group, said two people aware of the development.
Blackstone has put its BlueRidge special economic zone (SEZ) andanotherITSEZinHinjewadi area of Pune on sale, and hired Morgan Stanley to find a buyer. The deal will be in the range of Rs2,000 crore, said the first person. Others who have joined in the race include Shapoorji Pallonji-Allianz and Singapore-based investor-developer Ascendas- Singbridge. The 1.5-million-sq. ft BlueRidge special economic zone (SEZ) was acquired from private equity fundmanagerIDFCAlternatives in 2014, while the other SEZ— jointly developed by DLF and Hubtown (erstwhile Ackruti City)—was acquired by Blackstone for Rs810 crore in 2011.
CapitaLand, oneofAsia’slargest real estate companies, owns and managed a global portfolio worthmorethanS$88 billion ($67 billion) as of 31 December 2017, comprising integrated developments, shopping malls, serviced residences, offices, homes, real estate investment trusts (REITs) and funds, according to the company website.
In India, CapitaLandoperates sevenservicedresidenceproperties in Bengaluru, Gurugram, ChennaiandAhmedabadwhileit ownstwomallsinJalandharand Nagpur.
In January, CapitaLand had sold its stake in six malls across India to Bengaluru based developer Prestige Group for Rs324 crore. Prestige Group had acquired CapitaLand’s stake in special purposevehicles(SPVs) it hadformedbetweentwoparties.
Similarly, global investment firm Xander Group Inc., which has invested around $2 billion in India’s real estate sector, has made multiple buyouts recently as part of expanding its commercial office portfolio inthecountry.
It hadboughtanofficebuilding of around 250,000 sq. ft at Embassy Golf Links Business Park in Bengaluru for Rs350 crore last month. In 2017, Xander group and Dutch pension fund asset manager APG Asset Management NVboughtaninformation technology SEZ in south Chennai for around $350 million (Rs2,250 crore) from Shriram Properties. B. V. Bharadwaja, Groupcountryhead, India, CapitaLand International said, “We are constantly onthelookout for opportunities to expandourpresence in India and will not comment on speculation in the market.” Spokespersons at Black- stone, Morgan Stanley declined to comment while mails sent to Xander went unanswered. Though investors are keeping awayfromresidentialrealestate, offices remains a hot real estate investment destination in India.
In 2016, Canada-based Brookfield Asset ManagementInc. had acquired 5 million sq ft of commercial property from the Hiranandani group for $1 billion (Rs6,500 crore), in oneof the largest buyoutsincommercialrealty space. Withthedemandforoffice space increasing, the average office space to be absorbed in top Indian cities is expected to be at 40-45 million sq. ft per year until 2020, according to a Cushman & Wakefield 2017 report.
“Commercialofficerealestate is expected to see greater participation of foreign institutional investors astheycontinuetopick up leased and under-construction assets in India,” said the report - Commercial Office Real Estate: Positive Disruptions- Beacons of Change.
The investment scenario is nowmarkedbyacombinationof sovereign/pension funds with a long-term investment focus, along with private equity funds that have a typical 7-8 years investment horizon. This is leading to a marked shift in ownership pattern with institutional investors now being amongst some of the largest owners of office assets, it added.
In 2018, Blackstone is also set to buy an 80% majority stake in Nitesh Hub, a shopping mall in Koregaon Park, Pune
Blackstone has put its BlueRidge special economic zone on sale