Blackstone Group Lp’s property investments in the country are set to cross the $6-billion mark this year, even as the global private equity firm plans to diversify into the logistics sector.
Last week, Blackstone and developer partner Salarpuria Sattva bought the 100-acre Global Village Technology Park in Bengaluru for ₹2,800 crore (around $390 million) from Coffee Day Enterprises Ltd. Of this, Blackstone’s share of investment is around $275 million.
As of March, Blackstone had committed around $5.4 billion in real estate assets in India, of which $4 billion is in office assets alone. Since then, it has bought the ‘One BKC’ office building in Mumbai for ₹2,500 crore, and is working on a couple of large purchases including an office tower in Mumbai’s Bandra Kurla Complex for ₹1,900 crore from Adani Realty and the remaining 51% stake in Indiabulls Real Estate Ltd’s (IBREL) for ₹4,800 crore. With these transactions, it is poised to well cross the $6 billion mark this year.
2019 has been a significant year for the New York-based investor in India with multiple deals, including the country’s first real estate investment trust (REIT). It is also planning its second REIT with developer partner K Raheja Corp. as a minority partner.
“Blackstone had taken early bets in office assets and enjoyed the first-mover advantage and a long run. It has adopted the partnership route in India, collaborating with regional developers. The challenge in the partnership model is, however, managing partner aspirations and expectations as investment portfolios expand over time," said Shashank Jain, partner, transaction services, PwC India. Blackstone signed its first real estate transaction in India in 2008, but started buying office assets only in 2011.
A Blackstone spokesperson declined to comment.
Close on the heels of Blackstone is Canada’s Brookfield Asset Management Inc., which in less than five years, has assets under management (AUM) of $4 billion in India, and a commercial office portfolio of nearly 30 million sq. ft. There is also Singapore government’s GIC Pte Ltd, which has committed nearly $4-5 billion in real estate here. While Brookfield believes in a 100% owned platform and functions as an investor-developer, GIC is a typical patient, growth capital provider.
Having invested in office, residential and shopping malls in the country, Blackstone is now planning to look at logistics and warehousing opportunities, said a person familiar with the plans, who didn’t wish to be named.
In June, Blackstone said it is buying industrial warehouse properties from Singapore’s GLP Pte for $18.7 billion adding logistics is currently its highest conviction global investment theme.
“...Given the competition for core office assets from global sovereign and pension funds, it’s only a matter of time before investors like Blackstone start betting heavily on newer asset classes like industrial and data centres. Also, given the excess liquidity situation in Asia Pacific, many core investors will change their return expectations and move up the risk curve. However, in the short run, we see the Indian market lacking the depth to absorb the global volume of capital chasing core assets," said Ramesh Nair, CEO and country head, JLL India.
Blackstone has also evolved its investment strategy. After deploying capital mainly in core or operational assets, it is also eyeing brownfield deals with development potential. The Global Village acquisition is one such deal, where there is an operational IT park but the land also has 5 million sq. ft of development scope, which will be executed by its partner Salarpuria Sattva Group.