The Boom Is Back In Commercial Realty

31 Mar, 2018

Unlike residential real estate, which is still recovering, commercial real estate is roaring with M&A deals, corporate funding and even companies taking up office space. In the last one month alone, a spate of transactions in the commercial category has added heft to the realty market.

Industry watchers note that the high gestation period of commercial projects notwithstanding, developers too are increasing their pipeline of commercial real-estate projects.

IDBI Bank is the latest to have sold its office property at the Bandra Kurla Complex (BKC), to SEBI for ?1,000 crore. The deal is being billed the second-largest end-user office-space transaction by value after Abbott India’s ?1,480-crore purchase of 4.35 lakh sqft space at BKC, in September 2015.

The IDBI building has a built-up area of 3.41 lakh square feet.

Private-equity major Blackstone is also steadily increasing its portfolio of commercial projects. In a major real-estate deal, Indiabulls Real Estate (IBREL) has executed a definitive agreement with Blackstone Group to divest 50 per cent stake in its prime commercial properties in Mumbai for ?4,750 crore.

IBREL has executed transaction documents with the entities controlled by Blackstone to divest its entire holding in certain subsidiaries and thereby indirectly divesting 50 per cent stake in Indiabulls Properties and Indiabulls Real Estate Company at an aggregate enterprise value of around ?9,500 crore, IBREL said in a regulatory filing. The transaction is expected to be completed by March 31.

Indiabulls is the owner of two commercial office assets in Mumbai — Indiabulls Finance Centre and One Indiabulls Centre.

Last month, Ghodawat Enterprises concluded the sale of its fully leased building, Pinehurst, to an overseas fund. The asset, which was fully leased to an MNC client, was sold at an approximate value of ?350 crore.

Gagan Randev, National Director, Capital Markets and Investment Services, Colliers International India, which executed the deal, said: “We received strong interest from a host of bidders which clearly underlines that international and domestic funds and institutions are aggressively looking at acquiring grade-A pre-leased office assets.”

Last month, Indiabulls Dual Advantage Commercial Assets Fund reportedly bought a commercial office tower in Gurugram from real-estate firm Hines India, marking the first transaction from its new office fund.

Indiabulls partnered with co-investor Interglobe Real Estate Ventures, the real-estate arm of InterGlobe Enterprises, for this acquisition.

Indiabulls Dual Advantage Commercial Assets Fund is an alternative investment fund that was launched by Indiabulls Asset Management in 2017 to raise around ?1,500 crore, including ?500 crore from co-investors. The fund will invest in buying out office properties that generate regular stable rental income, with capital appreciation on exits.


Real estate PE

A fortnight ago, Godrej Fund Management (GFM), the real-estate private-equity arm of the Godrej Group, announced a first close of its $450-million office development fund and a first close of its $150-million office investment fund. Jointly, the funds can invest/develop office assets worth over $1 billion in value.

Godrej Build to Core (GBTC) – I is a $450-million ‘club style’ office investment platform that will invest in developing world class, Grade-A office buildings in leading locations across key office markets in India.

APG Asset Management, which has invested in previous funds managed by GFM, will be the cornerstone investor for GBTC-I.

The other newly raised fund is Godrej Office Fund - I, a $150-million discretionary blind pool fund that will invest in core and core-plus office and commercial properties across the country.

Pirojsha Godrej, Chairman, Godrej Investment Advisers, said: “We are pleased to enter the commercial real-estate private-equity space. There is a lot of opportunity for our fund management company in both residential and commercial real estate in India, and we are happy to see the business quickly reach the $1-billion AUM (assets under management) milestone.”