MUMBAI: Wall Street bellwether Goldman Sachs is set to invest $300 million (Rs 1,850 crore) in a joint venture company floated by listed developer Nitesh Estates, which will own and operate commercial real estate assets in India, people directly aware of the matter said.
Goldman will hold 74%, leaving Bangalore-based Nitesh Estates with 26% in the JV entity with plans to acquire rent-yielding office parks, shopping malls and luxury hotels, sources added. The impending deal is a proprietary investment from the Goldman Sachs balance sheet which has assets estimated at over $900 billion.
It joins a growing list of marquee global investors like Blackstone, Brookfield Asset Management, Qatar Investment Authority and GIC of Singapore which have been buying into India's over 400-million-sqft commercial real estate market over the last few years.
India's services-led economy - the fastest growing in the world - has thrown up a stable market for income-generating commercial real estate, giving investors a chance to list these assets through real estate investment trusts (REITs). These trusts are listed entities holding income-generating real estate assets from which earnings are distributed to shareholders. The Indian market regulator came out with REIT guidelines last year to help real estate and infrastructure developers list their rent-yielding assets, and providing large and small stock market investors with an inflation-indexed product.
Goldman Sachs is partnering with the first-generation entrepreneurial company Nitesh Estates, founded by 37-year-old Nitesh Shetty, to create a platform of assets worth almost $1 billion in the next few years. The still unnamed JV, on which a battery of top lawyers are completing due diligence, is expected to employ leverage financing of up to three times the equity commitment to go on a shopping spree.
Shetty, who built India's first Ritz Carlton Hotel, has in the past worked with several big global investors including Och-Ziff, Apollo Management and Citigroup. When contacted, he declined to comment on speculation. Goldman Sachs, too, offered no comments on this story.
Last week's Union Budget provided some tax clarity on REITs even though certain structuring challenges still remain. Four Indian developers - Embassy Office Parks (Blackstone), K Raheja Corp, RMZ Offices (Qatar Investment Authority) and Prestige Group - are readying to list their assets, which could translate into at least a $20-billion REIT market in the next few years.
The Indian market would rival or surpass Mexico's REIT market, often cited as a successful new world experiment, launched three years ago and with a current market value exceeding $18 billion. New York, London and Singapore have hogged the limelight in developed market.
New York-listed Brookfield Asset Management, with real estate and infra assets worth over $200 billion globally, struck the single largest deal when it acquired the office parks of Unitech for $1 billion - $400 million in equity and $600 million in debt. Private equity giant Blackstone Group, too, struck office park acquisitions worth more than $1 billion in recent years in India.
Blackstone-backed Embassy Office Parks and Brookfield India, with 21 million sqft and 17 million sqft portfolios, are among the top five office landlords in the country.
DLF tops the list with around 30 million sqft.
While foreign investors have mostly invested in office buildings, that too specifically in 125-million-sqft IT SEZs until now, they are turning to the country's hotels and shopping malls which have remained undervalued or, in some cases, distressed assets for a while.