Indiabulls Asset Management CEO Ambar Maheshwari says will look to buy 7-8 commercial real estate assets worth Rs100-200 crore from the new fund
Bengaluru: Indiabulls Asset Management Co. Ltd is launching its first commercial asset fund and plans to raise up to Rs1,500 crore from mainly domestic investors, said a fund executive.
Dual Advantage Commercial Assets Fund is an alternative investment fund (AIF) and will invest in buying out office properties that generate regular stable rental income with capital appreciation on exits.
Of the Rs1,500 crore, Rs1,000 crore will be raised through a blind pool of multiple limited partners (LPs) or investors and the remaining Rs500 crore from select family offices and investors through the co-investment route.
Fund-raising through the blindpool route involves raising money from a pool of multiple LPs who invest in a fund corpus.
Co-investments usually involve a two or three large investors who invest on a deal-deal basis.
“This is an opportune time to do something different from what we have already done and investing in office assets seems to be a good option. We are already talking to asset owners in key cities, including Hyderabad," said Ambar Maheshwari, chief executive-private equity, Indiabulls Asset Management.
Over the last few years, large global investors such as Blackstone Group Lp., Qatar Investment Authority and Canada’s Brookfield Asset Management Inc. have bought out rent-yielding assets in big-ticket transactions across cities.
Maheshwari said that with a number of institutional investors in play, the ready office space is competitive. “But we are looking to buy assets in the mid-end segment, between Rs100-200 crore and will do 7-8 transactions from the new fund," he said.
Indiabulls Asset Management, a unit of Indiabulls Housing Finance, has around Rs1,500 crore of assets under management (AUM). It is a relatively new entrant in the real estate private equity business and launched its first fund, a Rs600 crore debt fund, in early 2015.
It’s a good time to invest in office properties, with valuations being reasonable and prices not having shot up, said analysts.
Residential projects took over after the economic slowdown in 2008, when many developers gave up capital-intensive office projects and the former seemed to be a safe bet at the time. But since 2012-13, there has been a glut in the market, leading eventually to a slowdown.
Last month, Reliance AIF Asset Management Co. Ltd, a unit of Reliance Nippon Life Asset Management Ltd, launched a Rs1,000 crore rental yield fund, its first initiative to buy and own office projects, Mint reported on 30 January.
Reliance AIF’s fund will invest in high-quality assets in key cities that will generate regular rental income and capital appreciation on exiting the property.
Maheshwari said the fund will start looking at exits from the fourth year and it could be to a real estate investment trust (REIT), curated by institutional investors.
India’s commercial real estate sector is sending out all the right signals. A January report by property advisory CBRE said that on an annual basis, gross absorption touched close to 43 million sq. ft by the end of 2016, registering a growth of 9% on a year-on-year basis. Sustained occupier interest led to stability in quarterly office space leasing, with demand touching about 13.9 million sq. ft. during the last quarter of 2016, rising by about 20% on a quarterly basis, said the report. Leasing during the December quarter was mainly led by Bengaluru and Delhi National Capital Region, accounting for more than 50% of the total traction, followed by Pune and Mumbai.
“Commercial office sector is the current flavour as was residential a few years back. Investments in commercial real estate today are opportunistic and perhaps a little late because leasing has been strong in the last two years. However, as an asset class, the projection of the leasing market is positive and the asset class continues to generate good yields," said Anshul Jain, managing director-India at property advisory Cushman & Wakefield.
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