Private investors competing for commercial realty in India

India’s services-led economy,  which is the fastest growing in the world, has created a steady market for income-generating commercial real estate, giving private 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.

To help real estate and infrastructure developers list their rent-yielding assets as well as provide large and small stock market investors with an inflation-indexed product, the Stock Exchange Board of India, Sebi also came out with REIT guidelines two years ago. In order To further enhance the optimism in the commercial real estate market, The Union government has also recently given tax clarity in setting up REITs, as sought by global investors.

Bulge-bracket investors like Blackstone, Qatar Investment Authority, Goldman Sachs and GIC of Singapore are some of the institutional investors who have been increasing the volume of their Indian office space portfolio in recent years.

Brookfield Asset Management, one of the world’s largest property and infrastructure investors, is just a few days away from owning the commercial real estate assets of Hiranandani Developers in Powai near Mumbai for approximately Rs 6,700 crore). In the transaction, the company will buy the 4.5 million-sq-ft business park, making it the single largest commercial property acquisition in the country.

This deal would outdo Qatar-backed RMZ Corp’s recent acquisition of Equinox Business Park from Essar for Rs 2,400 crore in Bandra-Kurla Complex as the largest MA in the country’s commercial real estate market. Brookfield’s acquisition of the AIM-listed Unitech Corporate Parks for over Rs 2,000 crore in 2014 was another big transaction. The Hiranandani deal would see Brookfield competing with Blackstone Group, the most aggressive buyer of Indian office properties until now, for a bigger share of the 400 million sqft grade-An office space in India.

After acquiring Unitech Corporate Parks and Gammon’s road and power assets, Brookfield pipped other potential suitors (Canadian Pension Plan Investment Board and Blackstone) with an aggressive offer to chase down its third Indian buyout deal with the Hiranandani transaction.

With Unitech Corporate Parks 11million sq ft of leased office space and a potential to develop 6 million sq ft more, The Hiranandani deal will take Brookfield’s portfolio to over 21 million sqft. Blackstone, through joint ventures and fully owned subsidiaries, already has a 50 million sqft portfolio of office space in the country.

RMZ Group

The country’s office space market is experiencing a major boom with commercial real estate transactions of nearly $3 billion recorded during the last calendar year. In a series of high profile office space deals of large global investors like Blackstone, GIC of Singapore, Brookfield Asset Management, Canadian Pension Plan Investment Board and Middle East sovereign funds have chased down transaction opportunities. The latest is Bangaluru based RMZ group which has acquired Essar’s Equinox biz Park in Bandra-Kurla Complex in Mumbai.

India’s large grade-A office buildings, riding on a robust services economy, have returned stable yields to investors in an otherwise volatile real estate market.

In a latest, Southern real estate major RMZ Corp has acquired Equinox Business Park, owned by billionaire brothers Shashi and Ravi Ruia of Essar, in Mumbai for Rs 2400 crore. RMZ, in which Qatar Investment Authority is an investor, is said to have paid Rs 19,000 per sq ft for the deal.

RMZ has a target of acquiring 80 million sq ft of rent-yielding office space in the next five years across India’s top cities. This puts RMZ and Qatar combine in direct race with cross-town rival Embassy Office Parks to emerge as the country’s top office landlord. Private equity giant Blackstone Group owns 50% stake in Embassy Office Parks.

The biggest acquisition in Indian office space market is for Rs. 2,050 crore by Brookfield for the majority control in six parks in Unitech Corporate Parks, NCR and Kolkata.  It also paid an undisclosed amount to buy Unitech’s 40% holdings.

Embassy Office Parks acquired Vrindavan Tech Village in Bangalore for Rs 1,950 crore, which is also counted among the other big deals in the commercial space market.

L & T Realty is looking for the investors and partners in Navi Mumbai and Bengaluru

Larsen and Toubro Ltd’s real estate development arm L & T Realty Ltd is now seeking for the real estate investors and development partners for few projects which are about to come in the Bengaluru and Navi Mumbai as L & T Realty is planning to monetize its retail mall portfolio with an aim to use its land for the construction of offices. We all know that L & T Realty Ltd has huge real estate development portfolio and it is about 50 million sqft, and it includes both upcoming and ongoing real estate projects.

Projects of L & T Realty in Navi Mumbai and Bengaluru:

L & T Realty is the four year old firm from Larsen and Toubro and now its planning to bring developer partner for its Hebbal projects which is coming up in Bengaluru and in this project L & T Realty is developing residential apartments on the area of 45 acres, apart from that company is also planning to develop remaining 20 acre area with the help of joint venture partner. However; when it comes to Mumbai, so TOD (transit-oriented development) project which is coming up in Seawoods, Navi Mumbai, so here L & T Realty is looking for the strategic investor for the development of 1 million sqft retail space. However; the TOD project is coming around the railway station of Seawoods— Darave. Apart from that this developer is also coming up with 4 million sqft of office space as a part of 40 acre contiguous development under the Seawoods Grand Central project.

Recent transactions of L & T Realty:

Recently, L & T Realty has sold its commercial real estate project to Carnival Group in Rs.1, 785 crore and it was located in Chandigarh. This commercial real estate project includes a Hyatt hotel, office premises with a central courtyard and Elante mall. With the transaction of Chandigarh, L & T Realty exited from its real estate business in northern India and now its planning to focus on the projects which  are coming up in Chennai, Hyderabad, Mumbai, Bengaluru and Navi Mumbai. According to Shrikant Joshi, CEO of L & T Realty, “It’s not our policy to run malls and due to that we want to monetize them as we continue to build them in our projects. At this point of time in the Hebbal project, our company is planning to bring a joint venture partner for the development of office space. We are hoping to conclude all these transactions next year”. The more he added that In Seawoods, we are seeking for the investor partners, but we want someone who can be the worthy successor.

There are few developers which are showing their interest for Hebbal project and they are; Assetz Property Group, RMZ Corp. and some other developers and investors from Singapore. It is expected that by 2016, the L & T Realty will start to deliver the home in its projects which are in Seawoods and Powai in suburban Mumbai. Last year, the real estate market has under gone the number of challenges and due to that now buyers want to move with bigger and branded developers. According to Joshi, “Our strategy is to continue construct the projects which we have and on the same time we are looking for the joint venture partnerships with outstanding partners.

Due to brand value there are several branded developers such as; Godrej Properties, which have done well in the period when most of the developers where struggling. According to real estate experts, home buyers always shows a lot of faith in the larger brand association because they assure them with delivery capability, brand equity and goodwill.

commercial real estate

In most recent realty news, southern real estate developer, RMZ Corp is in the advanced stages of negotiations to acquire Equinox business park in Mumbai from the Ruias of Essar Group. Sources familiar with the development confirmed that the transaction has been concluded for a monstrous Rs. 2400 crore. While billionaire brothers Shashi and Ravi Ruia are divesting non-core assets to pare Essar’s debt burden, this is by far the largest real estate deals of Mumbai and one of the biggest in India.

Bangaluru  based RMZ, backed by Qatar Investment Authority (QIA), will pay around Rs 19,000 per sqft for Essar’s 1.2 million sqft biz park, located adjacent to Bandra Kurla Complex which houses lessees like IDFC, Tata Communications, Crompton Greaves, Nissan and Lafarge among other Essar companies. RMZ manages about 20 million sqft of commercial office space across multiple cities and is currently on the prowl for large acquisitions to build an 80 million sqft portfolio in the next five years.

Anshuman Magazine, chairman and managing director, CBRE South Asia, notes that The Essar – RMZ deal shows an improvement of interest in commercial real estate. Such core rental yielding assets have lower risks associated as there is no pressure of development and leasing.

Anuj Puri, JLL India chairman and country head,  said in spite of the various influences that shape up real estate markets across India, Mumbai’s intrinsic equity as India’s financial capital remains undiminished and continues to drive major decisions by corporate and investment houses.

In some of the other large transactions, GIC of Singapore acquired 69% stake in Nirlon, which manages a 2 million sqft office park in Goregaon suburb, for 1300 crore in December 2014.

About two months ago, pharmaceutical conglomerate Abbott acquired 4.35 lakh sqft of commercial space in a tower developed by Godrej Properties in Bandra-Kurla Complex for Rs 1,479 crore.

In another massive multi-layered deal in office real estate market, Brookfield purchased Unitech’s Corporate Park for Rs 2050 crore  for majority control of six parks in NCR and Kolkata. Furthermore, Embassy Office Parks, backed by Blackstone, acquired Vrindavan Tech Village in Bangalore for Rs 1950 crore.

India’s large grade office buildings, riding on a robust services economy, have returned stable yields to investors in an otherwise volatile real estate market. Assets worth nearly $3 billion have together been acquired by global investors like Canadian Pension Plan Investment Board, Brookfield Asset Management, Blackstone  and Middle East sovereign funds among others during the last calendar year.

RMZ Corporation Banglore

Essar is in initial negotiation stage with real estate developer RMZ Corp to sell its Equinox Business Park, which is located in Mumbai. According to sources the price of deal will be about Rs 2,400 crore, or $ 360 million. In recent years, this could be the biggest commercial real estate deal in the MMR region as billionaire brothers Ravi Ruia and Shashi Ruia are divesting their noncore assets to repay the debt of Essar.

Equinox Business Park, which owned by Ruia family is located adjacent to Bandra Kurla Complex and it is the house of leading market players such as; Nissan, Tata Communications, IDFC, Crompton Greaves and Lafarge and of course Essar companies as well. However; Bangalore based real estate developer RMZ Corp is backed by the QIA (Qatar Investment Authorit) and it is expected that it will pay about Rs 19,000 per sqft for Equinox Business Park, which is spread on an area of 1.2 million sqft. It is expected that RMZ will conclude the deal in tow equal stages over the period of six months. It will be 100 percent acquisition from both parties as both parties will meet certain milestones in their business. According to Manoj Menda, Vice Chairman of RMZ, “We confirmed the rumors of deal, but at this point of stage we cannot comment”, however; on the other side Essar declined any comment. According to statement of Anshuman Magazine, Chairman and Managing Director of CBRE for South Asia division, “This deal shows that how commercial real estate is generating interest among real estate developer, especially when it comes to core rental yielding assets. The risk associated with these kinds of properties is much lower than the fully constructed properties where there is no pressure of development and rentals”.

Currently, RMZ is managing about more than 20 million sqft of office space in different cities and now this real estate developer is looking for some large deals to acquire more space in commercial segment as RMZ aims to build a 80 million sqft portfolio in the next three to five years. RMZ’s this acquisition is one of the largest and latest among the series of high profile office space deals because some global investors such as; Brookfield Asset Management, GIC of Singapore, Canadian Pension Plan Investment Board¸ Middle East and Blackstone are over sign a funds to down transaction opportunities in the India. In last calendar year these global investors have acquired assets worth $ 3 billion. In present all the major global real estate developers seeing Indian real estate market as a golden opportunity as in India “Grade A Office” buildings are riding on a robust services economy. Anuj Puri, Chairman and Country Head of JLL India stated that in spite of different influences which shape up real estate markets in India, inherent equity of Mumbai as India’s financial capital remains undiminished and it is expected that it will continue to drive major decisions by large corporates and investment houses.

In December 2014, GIC of Singapore was acquired 69 percent stake in Nirlon and currently it is managing 2 million sqft office space in Goregaon suburb and its cost is Rs. 1300 crore. Apart from that we all know that last month pharma MNC Abbott was acquired .35 lakh sqft in one of the commercial tower at BKC which was developed by the Godrej Properties and cost of deal was about Rs 1,479 crore. It was considered as the biggest transaction for any single user commercial real estate in India.

However; Brookfield’s Unitech Corporate Parks acquisition was seen as the biggest acquisition in Indian office space market. However; it paid Rs 2050 crore for majority control of six parks in Kolkata and NCR. Apart from that with undisclosed amount they also buy 40 percent holding in Unitech.