Sovereign, pension funds bet big on commercial realty
$1-1.5 billion or up to Rs 10,000 crore could get invested in rent-yielding assets like offices and malls
Jan 06, 2015
Source : The Financial Express


Mumbai: The new year could well turn out to be a big one for the commercial real estate sector as $1-1.5 billion or up to Rs 10,000 crore could get invested in rent-yielding assets like offices and malls by large sovereign and private equity funds alone.

Sovereign/pension funds with deep pockets like GIC, Canada Pension Plan Investment Board (CPPIB), Abu Dhabi Investment Authority (ADIA), Qatar Investment Authority (QIA), dutch pension fund APG and bigger foreign funds like Blackstone, Brookfield, Xander would vie for at least 15-20 million square feet of assets in 2015, say sources.

CPPIB refused to participate in the story, while a mail sent to ADIA remained unanswered. QIA, APG, Blackstone, Brookfield and Xander could not be contacted.

Assets of major real estate developers like DLF, Bagmane Developers, BPTP, Embassy Property Developments were among the 18 real estate developers that could get acquired, as developers and funds prepare for the launch of Real Estate Investment Trusts (REIT) in the next 18-24 months.

In the most recent examples, Singapore-based Ascendas India Trust agreed to acquire Pune-based Paranjape Schemes (Construction) phase II of BlueRidge IT/ITES SEZ, which on completion could be valued over Rs 600 crore. Singapore’s sovereign wealth fund GIC plans to acquire controlling stake of 62.6% in Nirlon, the owner of Nirlon Knowledge Park, an IT Park in Mumbai, in a deal that could be well over Rs 1,250 crore. During the year, Canada’s Brookfield Asset Management bought Unitech Corporate Park’s IT assets for £188.9 million.

According to industry experts, more such deals are in the offing. Ramesh Nair, COO (business and international director), JLL India, says, “At least half a dozen sovereign/ pension and large funds are currently evaluating assets”.

India’s largest real estate developer by market capitalisation DLF has said it is in talks with global players to forge partnerships for its REIT platforms and may launch an REIT in 2015-16. The Gurgaon-based realty firm has about 24.7 million square feet of commercial stock that could get monetised over a period of time. The office platform of the company would have a bulk of IT Parks and SEZ spread across Hyderabad, Chennai, Kolkata, Chandigarh and Gurgaon, say sources.

Ashok Tyagi, the chief financial officer at DLF, told FE that the company’s intention of having an REIT remains intact. “It would take 3-6 more months for the plan to get completely frozen. We would like to see some more clarity on the taxation, MAT and asset transfer issues in the Budget to get a clear picture.”

Meanwhile, Blackstone, CPPIB, ADIA, APG and even Xander are said to be in talks for acquiring 247 HCC Park, a commercial project in Mumbai. “It will take another 3-6 months to monetise the asset,” said a source. The property is a 1.8 million square feet development in which private equity fund IL&FS Milestone Realty Advisors and HCC Real Estate, realty arm of HCC have 74% and 26% stakes, respectively.

In June 2013, Blackstone Group had signed a term sheet with HCC for buying its stake in the project for around Rs 1,000 crore. A response from HCC is awaited.

Shrikant Paranjape, the chairman, Paranjape Schemes (Construction), which recently sold a part of its IT SEZ to Ascendas, says he will be looking at garnering Rs 200 crore in the next one year, by divesting various commercial properties that are currently under-construction. He added, “As renting would not be our focus area, we have decided to sell the SEZ. The mall and multiplex proposed in Blue Ridge township will also be likewise divested in future once the construction is complete and the asset is leased”.

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