RMZ Corp plans to exit residential business, expand commercial portfolio

RMZ Corp is in the process of rapidly expanding its commercial real estate business as it gears up to launch REITs in the next two years


RMZ Corp is actively looking to acquire office assets in different parts of the country.
RMZ Corp is actively looking to acquire office assets in different parts of the country.

Mumbai: Bengaluru-based real estate developer RMZ Corp. is planning to completely move out from the residential business as it sets out on an expansion drive to boost its commercial portfolio across major cities in the country.

Backed by Qatar Investment Authority, the company is in the process of rapidly expanding its commercial real estate business as it gears up to launch REITs (Real Estate Investment Trusts) in the next two years. It is actively looking to acquire office assets in different parts of the country.

“We had launched few residential projects few years back. From a strategy standpoint, residential business is going to be on the backburner. We are not going to take up any fresh projects. It is only going to be commercial real estate going ahead,” Thirumal Govindraj, managing director (management), RMZ Corp., told Mint over the phone.

Govindraj said the residential business currently accounts less than 10% to its overall business. The company had entered into the housing business in 2011 under the brand RMZHomes. However, it plans to focus only on commercial real estate and “carve a niche” for itself in the office space. The company currently has four mid-income and luxury housing projects with around 1.3 million sq.ft of development space in Bengaluru. All of them are in the final stages of delivery, he added.

At present, RMZ Corp. is on a lookout to buy land parcels or ready office assets in Bengaluru, Mumbai, Hyderabad and Chennai. The company has around 20 million sq.ft of core assets under management. It is looking to expand up to 80 million sq.ft in the next five years.

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In 2013, the Qatar-based sovereign wealth fund had invested around $300 million in RMZ Corp.

Earlier this year, RMZ Corp. signed a Rs.2,350 crore deal to acquire Essar Group’s Equinox Business Park, a 1.25 million sq.ft office space in Mumbai’s financial hub Bandra-Kurla Complex (BKC). Last year, the company also bought out 8 lakh sq.ft of IT Park space in Gurgaon from property firm BPTP Ltd for $150 million.

RMZ Corp.’s co-founder and corporate chairman Raj Menda had earlier said that the company is not likely to go for REIT listing before 2018 as it is currently focused on acquiring a significantly sized portfolio to do so.

According to real estate brokers and advisors, large developers are increasingly playing to their core strength and focusing on specialization with increasing competitiveness within the sector.

“While it is within the larger gamut of real estate, the product (commercial real estate) is absolutely different from residential. So limited management bandwidth could be well spent on your core strength. Over a period of time one would see large developers playing to their strength and that specialization and segregation is bound to happen,” said Shashank Jain, ‎executive director/partner, transactions group, PwC India, a research and consulting firm.

He said unlike the residential space, the commercial real estate business requires significant capital infusion, different mindset, focus, development capabilities, sales and marketing aptitude, right from land acquisition to development and leasing it.

Earlier this year, the company signed a Rs2,350 crore deal to acquire Essar Group’s Equinox Business Park, a 1.25 million sq. ft office space in Mumbai’s financial hub Bandra Kurla Complex (BKC). Last year, the company also bought out 8 lakh sq. ft of IT Park space in Gurgaon from property firm BPTP Ltd for $150 million.

RMZ Corp.’s co-founder and corporate chairman Raj Menda had earlier said the company may not go for an REIT listing before 2018 as it is currently focused on acquiring a significantly portfolio size to do so.

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