Sovereign investor GIC of Singapore has expressed its interest in buying a $200-million, or Rs 1,400 cr, stake in the tenanted office space unit of leading southern developer Prestige Estates Projects. GIC looks set to secure the ownership of slightly over 40% in the rent-yielding, 5 mln sqft office portfolio that counts JP Morgan, Cisco, Microsoft and Mylan as tenants.
The Singapore investor has been one of the most active backers of Indian income-yielding commercial real estate where it has poured in more than $2 billion, primarily into office buildings and shopping malls. Last year, GIC bought a significant minority stake in the rental arm of the country’s largest developer DLF for $1.4 billion.
Canadian pension fund CPPIB was also in contention to buy into the business unit of the Bengaluru-headquartered Prestige Estates, which is listed on the BSE with a market capitalisation of $1.8 billion, or Rs 12,000 cr.
Prestige, one among India’s top residential developers, has an overall rental portfolio of nearly 9 mln sqft including IT parks, SEZs, retail and hotels — earning an annualised income of about Rs 720 cr. The deal with GIC mostly involves the office space portfolio located in Bengaluru.
Prestige is currently the country’s third-largest residential player after Lodha Developers and DLF, and it is aggressively building up rent-yielding commercial businesses that have shown more resilience in recent years amid tepid growth for the real estate sector. The company expects to more than double this to Rs 1,400 cr by 2020 as its under-construction office buildings start rental yields and rents from existing offices see a spike.
The big realty players have all started paying attention to developing a tenanted office portfolio with stable yields in an otherwise stormy world of Indian real estate. Mumbai-based Lodha, which is gearing up for a much delayed IPO, said it plans to build assets under management of $1 billion in income-generating office buildings over the next three years.
The world’s largest private equity investor Blackstone Group has pumped nearly $3 billion into the tenanted office space market, expecting to reap better returns in a fast expanding, service-oriented Indian economy.The impending stake sale in the rental arm is the fourth deal Prestige is set to do under its chief executive Venkat Narayana, who assumed office in August. The other three deals include the creation of an affordable housing platform with HDFC earlier this month, buying the stake of Singaporean property company CapitaLand in six of its retail mall assets and a property management company for Rs 342 cr, and purchasing about 67% in its group firm — which holds a land parcel of 180 acres in Bengaluru — from Red Fort India and landowners for Rs 324 cr.
Prestige reported a profit of Rs 309 cr on an operating revenue of Rs 3,650 cr for the nine months ended December 31. The company’s shares ended marginally down at Rs 321 in a falling Mumbai trade on Friday.