Blackstone set to buy 247 Park in Mumbai for Rs1,060 crore

With the buyout of the office project, Blackstone will become the largest owner of office assets in the country

Bengaluru: Pursuing its acquisition streak, global private equity fund Blackstone Group Lp is set to buy a commercial office project in suburban Mumbai for 1,060 crore, including assumed debt, from HCC Real Estate Ltd and IL&FS Milestone Realty Advisors Pvt. Ltd after nearly two years of negotiations, according to three people familiar with the development.

“The deal was signed on Wednesday night between the parties. There are some procedural matters which will be concluded this week," said one of the people cited above. All spoke on condition of anonymity pending an announcement of the deal.

With the buyout of the 247 Park office project, Blackstone will become the largest owner of office assets in the country, with nearly 32 million sq. ft of office space across cities including Mumbai, Bengaluru, the National Capital Region (NCR) and Pune.

Almost 65-70% of this space is leased out and only a part of the portfolio is under construction. Blackstone doesn’t own a 100% stake in all these assets and has partnerships with developers in quite a few of them.

The 247 Park transaction has been in the process for a long time. It was called off in mid-2014 over a difference of opinion between the owners even as Blackstone remained keen to buy the asset. Negotations, however, resumed.

In 2010, a fund of IL&FS Milestone Realty Advisors acquired a 74% stake in 247 Park, a 1.8 million sq. ft commercial property in suburban Vikhroli, while 26% remained with HCC Real Estate, which developed the property. The property was then valued at 775 crore.

IL&FS Milestone is a joint venture between Milestone Capital Advisors Ltd and IL&FS Investment Managers Ltd.

Currently, the 247 Park asset has debt exposure of around 300 crore. The structure of the transaction is such that Blackstone will distribute around 775 crore between HCC and IL&FS Milestone, out of which HCC’s share will be around 200 crore, the people cited above said. Blackstone will assume the debt.

HCC will use the money to pare its debt of almost 5,000 crore.

Blackstone and HCC declined to comment. A Milestone spokesperson confirmed the transaction but didn’t disclose details.

The acquisition of 247 Park further expands Blackstone’s real estate portfolio in India, as it inches towards a possible real estate investment trust (REIT) listing in the next 12-18 months.

“Blackstone still has appetite to buy more good quality assets before it actually consolidates its portfolio and starts moving towards a REIT. With a huge portfolio like this, it will take up a few months for this process to happen," said a person familiar with the development, who didn’t wish to be named.

Earlier this year, Blackstone bought Oxygen, a special economic zone in the NCR, from 3C Company for around 620 crore.

REITs typically invest in completed, yield-generating realty assets and distribute a major part of the earnings among investors. The income of these investment trusts mostly comes from the rents received from the properties.

DLF Ltd, India’s largest real estate developer, has 29-30 million sq. ft of office and retail shopping mall space, second only to Blackstone. DLF has already announced plans to form two REIT platforms to monetize its portfolio.

Property consultants believe that Blackstone has a more diversified portfolio spread across different parts of the country, while DLF’s is more concentrated in Gurgaon, on the outskirts of New Delhi, and a couple of other cities.

“Institutional investor interest in the office space sector has been high over the last 3-4 years. With REITs becoming a reality, the value of office assets will only grow," said Rajeev Bairathi, executive director (capital transactions group and north India) at property advisory Knight Frank India.

Bairathi said that while good quality assets are available in top property markets such as NCR and Bengaluru, REITs will help in discovering the price and valuation of these assets.