MUMBAI, NEW DELHI: American private equity fund Blackstone has acquired an IT special economic zone of 1.5 million square feet owned by real estate developer 3C Group for Rs 625 crore, two people with direct knowledge of the development said, signalling renewed interest by overseas investors in the commercial office space.
The deal will make Blackstone top owner of commercial real estate in the country. A Blackstone spokesperson declined comment. There was no response from 3C.
The 27-acre Oxygen SEZ on the Noida-Greater Noida Expressway has about 300,000 sq feet of space that is still to be leased and another 500,000 sq ft that can be developed, the people cited above said. Blackstone now has 27 million sq ft of commercial space that's operational and 6 million sq ft under construction.
"Developers in India that have put in a lot of effort over the past 10 years are now looking for a natural exit," said Anshul Jain, chief executive, DTZ, a real estate advisor. "For funds, investing in such core income-producing assets is one of the safest options."
The purchase is one of the rare deals in which the PE fund has gone solo, breaking its tradition of buying commercial space jointly with real estate developers. It earlier purchased Express Towers jointly with real estate developer Panchshil Realty and commercial space in Bangalore with Embassy Group, apart from other spaces across the country.
Blackstone is likely to lease out the rest of the space on its own after it takes over the property in the next two weeks. The building houses multinational tenants including United Health Group, Sapient, Dell, EXL and others that are paying rentals averaging Rs 35 per sq ft every month.
ET on Monday reported that Blackstone has begun the process of grouping all its commercial properties in India to list them in a real estate investment trust or REIT. Listing on local bourses is expected to raise around $1.5 billion, or Rs 6,000 crore, through the sale of about 50% to retail and institutional investors. For three years, Blackstone has been aggressively pursuing acquisition of yield (rent)-generating office space and has spent almost a billion dollar to scale up its portfolio.
As per KPMG, India has an estimated 350 million sq. ft of 'grade A' office space, valued at $65-70 billion, of which about 80-100 million sq ft is estimated to be eligible for REITs in the next 2-3 years and valued at about $15-20 billion.
Jain said institutionalisation of the commercial space market ensures buildings are maintained well and don't start resembling those in Connaught Place. Delhi's original central business district has lost its appeal because of badly maintained buildings that were originally sold as individual floors by builders rather than being leased out.
India's largest listed developer DLF has a rental portfolio of about 29 million sq. ft, of which office space accounts for 24.8 million sq. ft that is operational and 1 million sq ft under construction, according to HDFC Securities. Retail or shopping mall portfolio comprises 1.6 million sq. ft of completed space and 1.8 million sq. ft under construction.