Bengaluru: Barely three months after striking a joint venture, private equity (PE) firm Blackstone Group Lp and Indiabulls Real Estate Ltd (IBREL) plan to develop it into a commercial properties platform with rent-yielding assets, said one person familiar with the development.
The plan is to add six office assets on the platform within the next three to six months, of which three will be jointly acquired and the remaining would comprise projects already being developed by IBREL.
“The properties are going to be in Mumbai and NCR (National Capital Region) and the idea is to bring assets with annuity income under the joint venture," the person said, requesting anonymity.
In March, Blackstone had bought a 50% stake in IBREL’s office properties, One Indiabulls and Indiabulls Finance Center, in central Mumbai for $730 million (₹ 4,750 crore).
IBREL will not pursue its earlier plan to carve out a separate entity for its commercial office business, given its new partnership with Blackstone. In 2017, the company’s board had decided to create a new vertical to house the two businesses, where the residential business would continue to remain with IBREL and the new entity—Indiabulls Commercial Assets Ltd (IBCAL)—would hold existing leasing and commercial assets, as well as future projects.
“Instead of IBCAL, the platform with Blackstone will house the office assets. Investment decisions to sell will be taken by IBREL, while buying decisions will be taken by the Blackstone board. At some point in time, the partners may consider to list the assets as a REIT (real estate investment trust) depending on how the REIT model plays out in India," the person added.
When contacted, Blackstone declined to comment.
In recent months, Indiabulls has been steadily building its rental office portfolio in NCR and Mumbai. IBREL, through a subsidiary, had entered into an agreement to acquire a newly-constructed commercial building with leasable area of about 250,000 sq. ft in Gurugram. The company was also looking to acquire a commercial building at Udyog Vihar, Gurugram, for ₹ 150 crore.
Indiabulls Infraestate Ltd, a subsidiary of IBREL, had signed a term-sheet with Oricon Enterprises Ltd to jointly develop a commercial building on a land parcel in Worli, Mumbai. Once executed, Indiabulls would get ownership rights to about 255,000 sq. ft of leasable area.
IBREL expects to enhance its annuity revenue to ₹ 1,547 crore by 2020-21 from the rental properties portfolio, including the rental portfolio of its 50:50 JV with Blackstone. The Mumbai-based developer has also taken strategic calls to streamline its real estate portfolio.
In May, IBREL had sold off its 1.9 million sq. ft office park, One Indiabulls Park, in Chennai to Blackstone in an outright deal for ₹ 900 crore. It was part of its plan to exit the southern city, a non-core market for the company’s business. It had also sold its residential township project, Indiabulls Greens, in Chennai to Bengaluru-based Ozone Group for ₹ 285 crore.
“Blackstone’s strategy in India has been to grow through partnerships and it makes sense to have regional partners. The NCR office market is clocking healthy absorption with 7.5-8 million sq. ft being leased every year, and has space to expand," said Rajeev Bairathi, executive director and head of capital markets, at property advisory Knight Frank India.
“With REITs having the ability to deliver double-digit returns through a mix of dividend yield and capital appreciation, India’s current Grade A office stock of 454 million sq. ft presents a large opportunity," said a recent ICICI Securities report.