BANGALORE: Former Jones Lang LaSalle (JLL) head and entrepreneur Mike Holland is set to become CEO of an equal JV between private equity giant Blackstone and leading office space developer Embassy Group, setting in motion one of India's first real estate investment trusts (REITs) to be listed under regulations that are being framed currently.
Having over two decades of experience in commercial real estate in India and abroad, Holland will be given the reins of a company, Embassy Office Parks, which has 13.5 million sq ft of tenanted office space and with a potential to develop an additional 12 million sq ft, multiple sources briefed on the matter said.
Holland, a former JLL India country head, also spearheaded Microsoft's real estate business when he helped the tech giant set up a massive campus in Hyderabad. He later turned entrepreneur co-founding Assetz Property Services, a real estate management firm, which he's exiting to board the Blackstone-Embassy JV, sources added. Holland was travelling overseas and could not comment on the appointment, said a person close to him. Embassy officials confirmed Holland's entry, while Blackstone could not be reached over the weekend.
The appointment carries a mandate to expand and acquire the existing office space portfolio before going for a REIT listing in the next 24 months. REITs are listed entities which hold income generating real estate from which earnings are distributed to shareholders. Indian market regulator came out with REIT draft guidelines in October this year to help real estate and infrastructure developers list rent yielding assets.
This would also help PE firm like Blackstone — which has binged on the Indian office space story — book profits in a market where return on investments has been abysmal. It would provide the investor class — initially HNIs and institutional investors — an inflation indexed asset platform sorely missed in the country, leading to buys of imported gold distorting the country's fiscal deficit. Large domestic developers like K Raheja Corp are also at work to spin off office space portfolio into a separate entity, to be readied as a REIT.
Global financial power houses and sovereign wealth funds have pursued the Indian tenanted office space market in 2013, a sector that consistently belts outs yields of 10% to 15% per annum. These asset classes also benefit from long-term capital appreciation, giving investors a solid base on which they can grow their million dollar investments. Blackstone has led the chase in commercial office buys in India with investments topping $700 million, followed by Qatar Investment Authority that has sunk in $300 million in gaining a foothold in RMZ Corp's 8-million sq ft tenanted office space SPV. Singapore's GIC and Canadian Pension Plan are among the other investors showing appetite for domestic rent yielding realty.
Embassy Office Parks will expand the portfolio once the Bangalore-based developer gains 100% shareholding of Vrindavan Tech Village, a 2.1 million sq ft tenanted IT park, with potential develop another 10 million sq ft. This acquisition could the Blackstone-Embassy JV a development portfolio in excess of 20 million sq ft in India's IT capital. It is not clear whether Blackstone, which has investments in commercial assets of Panchshil, would combine the portfolio ahead of a possible REIT listing.