PE firm Blackstone inks India’s biggest commercial real estate acquisition deal

US private equity firm Blackstone has inked India's biggest commercial real estate acquisition deal, which will give it 50% stake in a Bangalore builder-owned portfolio of three business parks for $200 million (over Rs 1,000 crore).

The deal beats Citigroup's acquisition of a Mumbai office building earlier this year for Rs 985 crore, which was bigger than Maple Tree's Rs 800-crore buyout of 2 million sq ft from Assetz Global Technology Park and Baring PE Partners' Rs 500-crore investment in RMZ Corp for 6 million sq ft space.

A person familiar with the matter told ET that Blackstone, which invests in realty firms, has bought stake in an SPV comprising three commercial properties totalling over 10 million sq ft — Embassy Golf link and Manyata Embassy Business Park in Bangalore and Embassy Tech Zone in Pune.

"Blackstone and Embassy Property Developments signed the transaction earlier this month. The deal was followed by the October 4 order of the Competition Commission of India, which gave clearance for the transaction," said the person, who did not wish to be named. "It is an equity-level investment, where a holding company was floated with three commercial assets under it. However, the deal finally cascaded down to the SPV level."

A detailed email sent to Embassy did not elicit a response while Blackstone in an email reply said, "We would not like to comment on this story. Our communication protocol does not allow us to speak on market speculation."

Experts said the deal is in line with this year's trend. "Given the uncertainties in political and economic environment, investors are risk-averse and are investing in pre-leased commercial assets. Around 70% of the transaction closed this year are in pre-leased assets," says Rajeev Bairathi, director-investment advisory at DTZ India.

As per the transaction, Blackstone will get compulsorily convertible debentures of Pune Dynasty Projects (PDP), which is currently into the development of the non-SEZ part of Embassy TechZone in Pune.

Once converted, Blackstone will hold 50% stake in the SPV. Additionally, Embassy, which owns 51% stake in PDP, will acquire 49% from Alta Vista, a Mauritius-based financial institution, making it a subsidiary of Embassy Property Developments (EPD).

"Post this acquisition, EPD will transfer its shareholding of 35.77%, 51.01% and 48.75% in the three SPVs in Pune and Bangalore that are developing business parks along with some other assets in the form of advance paid for the purchase of land and for acquiring joint development rights to PDP.

Herein after, all the three SPVs will become the investee company," said a CCI order. Embassy Golf link is a 5-million-sqft, or 65-acre, business park while Manyata Embassy Business Park is a 100-acre integrated mixed-use development business park, which has a developable area of 18.29 million sq ft.

Embassy TechZone in Pune is spread over 70 acre with 52 acre designated for a special economic zone. Some of Embassy's big tenants at its commercial properties in Bangalore and Pune include IBM, Capgemini, Mercedes Benz, Atos Origin and Accenture. "Blackstone and Embassy will jointly control and manage the entity in which the fund has invested. The deal has very complicated structure with multiple cross-holdings. Embassy will be responsible for completion of the project," the person said.