DELHI: Dutch pension fund manager APG Asset Management and PE firm Xander have launched a $300 million (Rs 1,800 crore) fund that will buy high quality income-generating office assets in India's main office markets.
"Over time, if buying opportunities continue to emerge, the venture's size may be increased to $500 million," a statement from APG and Xander said.
The venture aims to benefit from the demand for office space coming in from companies across sectors such as IT and financial services and will solely focus on built, and significantly leased office assets in Mumbai, NCR, Bangalore, Hyderabad, Chennai and Pune.
"In spite of the recent slowdown, India's top 6 cities have consistently witnessed the largest net absorption of office space in the Asia-Pacific region, and perhaps globally. This, combined with limited new development starts for office projects in India, creates a unique demand-supply gap for good quality office space that our venture aims to target," said Sachin Doshi, head of non-listed real estate for Asia-Pacific at APG in Hong Kong.
APG had invested Rs 180 crore in Lemon Tree Hotels and another Rs 470 crore in a JV with the company in 2012 to build and manage hotels. It recently increased its stake in the company from 5.66% to 13% by investing an additional Rs 300 crore.
It also joined hands with Godrej PropertiesBSE -0.53 % to set up a Rs 770 crore residential development platform which will focus primarily on development of mid-income residential projects in Mumbai, NCR, and Bangalore and may opportunistically invest in Pune and Chennai.
Rohan Sikri, partner at Xander Investment Management, Singapore said: "While the Indian office market has been relatively resilient through the bad economic environment of the last few years, buyers of Indian office assets need to have the skill to identify and address complex title, construction and regulatory risks, and sweat the real estate after acquisition to preserve and create value.
It requires patience, attention to detail and local real estate expertise."
Corporate demand for office space has picked up pace in the last two months with office space leasing rising 58% in the January to March quarter, according to property advisory firm Cushman & Wakefield.
Several large institutional investors including Blackstone, GIC, Indiareit, and others have been picking up income-producing assets across the country in the last few years.
In a recent transaction, Embassy Office Parks, which is a joint venture between Blackstone and Bangalore-based Embassy group, paid Rs 1,951 crore to acquire a controlling stone in Vrindavan Tech Village, which has a potential built-up-office area in excess of 15 million sq ft with 1.9 million sq ft already completed.