PE firm Blackstone eyes biggest real estate play

To Buy 36% Stake In Embassy Groups Office Portfolio For $230 Million 

 

 

Blackstone Group is set to acquire 36% ownership in the tenanted office space portfolio of southern developer Embassy Property Developments for about $230 million (Rs 1,300 crore),said bankers close to the transaction.

This will be Blackstones biggest real estate deal in India,giving it part ownership of more than 12 million sqft office towers housing prominent technology names that drive the outsourcing economy.

Embassy,one of the top business park builders in the country,is demerging the FDI complaint office buildings in which Blackstone will acquire a significant minority interest.Blackstone has signed a term-sheet with the Bangalore-based developer and is conducting due diligence.The companys commercial play has largely been focused on the development of business parks,of which the two largestthe 100-acre Manyata Tech Park and the 65-acre Embassy Golf Links Businessare situated in Bangalore.

The tenant list of Embassys office buildings spread across Bangalore,Pune and Coimbatore includes IBM,Accenture,Capgemini, Atos Origin,Cognizant,Fidelity,Mercedes Benz and Target.

Embassy Group CMD Jitu Virwani and a spokesperson for Blackstone declined to comment.Embassy had shelved a $500-million initial public offering (IPO) last year.

The transaction values Embassys new holding company for office buildings at $900 million after rolling over Blackstones earlier investment in one of the projects.

Blackstone had acquired HDFCs minority stake in a large business park for $100 million,and the latest deal takes overall investment to about $330 million.The Blackstone investment will cover only tenanted office buildings and not those under development.

Blackstone owns hotels,shopping malls and office buildings primarily in North America and Europe.The PE major has shown appetite for Indian office buildings and struck smaller deals with developers like DLF in the past two years.Blackstones real estate portfolio,with an estimated worth of $48 billion,include Hilton hotels and the recent acquisition of Motel 6 from Accor.

Private equity firms and global investment houses are allocating a part of their portfolio to risk-free income yielding assets,such as IT business parks,which provide 9% to 12% assured returns besides providing capital value appreciation.

Baring Private Equity Partners invested $100 million for a stake in the office space portfolio of another Bangalore developer RMZ Corp earlier this year,while Singapore-listed investment house Ascendas is in advanced talks to buy out an IT SEZ of Shriram Properties in Chennai.