Ascendas India Trust Buying Amazon-Leased Hyderabad Offices for $70M

Ascendas India Trust on Tuesday announced that it has agreed to purchase an office building in Hyderabad, India leased almost entirely to online giant Amazon as the CapitaLand-managed REIT continues to build its tech space portfolio on the subcontinent.

The Singapore-listed trust is paying INR 5.06 billion ($70 million) for the asset known as aVance 6, in its latest buy from local developer Phoenix Group’s aVance IT park in the capital of south-central India’s Telangana province.

“The proposed acquisition provides a-iTrust an opportunity to scale up our presence in HITEC City and will add Amazon as a tenant to our IT park portfolio,” said Sanjeev Dasgupta, chief executive of the trust’s manager.

The transaction in Hyderabad’s HITEC City hub is Ascendas India Trust’s fifth acquisition of a building in aVance IT Park from Phoenix, with a sixth set to follow pending further construction..

Building an India Tech Portfolio

aVance 6 has about 640,000 square feet (59,458 square metres) of leasable area, which at the announced compensation shows that the REIT is paying the equivalent of INR 7,906.25 ($109.38) per square foot for the freehold property.

A local division of e-commerce giant Amazon has leased 98.3 percent of the space in aVance 6, which Ascendas India Trust had agreed to purchase as a package with the still incomplete aVance 5, as part of a forward-purchase deal announced in 2018. Under the terms of the earlier agreement, the trust would be paying S$270 million ($204 million) for the pair of properties.

COVID-related issues delayed the finish of the 640,000 square foot aVance 5, with the REIT manager saying that the property is expected to be complete within the first half of this year. The manager indicated that a large US MNC has already signed a letter of intent to lease the property when complete.

“The improving connectivity and enhancement work being carried out at aVance, HITEC City, Hyderabad would benefit our tenants in the future,” Dasgupta said.

Scaling Up at HITEC

Ascendas India Trust is moving forward with its latest deal after having acquired aVance 1 and aVance 2, a pair of earlier buildings totalling 427,700 square feet in Phoenix’ HITEC City, in February 2012. The REIT then purchased aVance 3, totalling 682,900 square feet, in July 2015, and had made its most recent pickup in the park, of the 390,000 square foot aVance 4, in April 2017.

aVance IT park spans 25.68 acres (10.39 hectares) and consists of 10 buildings with a total area of 4.6 million square feet, of which nine buildings with 3.4 million square feet have been completed and leased to IT firms.

As of 31 December 2020, a-iTrust’s assets under management stood at S$2.1 billion ($1.6 billion). The portfolio consists of seven IT business parks and one logistics park, including aVance parks in Hyderabad and Pune.

Red-Hot Market

Ascendas India Trust’s trail of transactions puts it at the centre of a growing investment trend. Real Capital Analytics reported this month that India enjoyed Asia Pacific’s highest growth in commercial transaction volume in the fourth quarter of 2020, delivering a 352 percent year-on-year spike to $4.3 billion.

The blowout figure was influenced by a pair of portfolio mega-deals that closed during the quarter.

First up was Brookfield Asset Management’s $2 billion acquisition of 16 office and co-working assets from Bengaluru-based RMZ Corp. The Indian developer sold 18 percent of its overall portfolio of 67 million square feet to the Canadian investment firm in the biggest deal in the country’s real estate market.

Next was private equity bigfoot Blackstone’s $1.5 billion purchase of commercial and retail properties from Bengaluru real estate player Prestige Estates. The sale of 21 million square feet of assets included five completed office assets, four under-construction offices, nine retail malls and two hotels.

In all, India saw a record level of commercial property investment in 2020 at $6.2 billion, up 46 percent.

Earlier this month, Canada’s Brookfield launched the $520 million IPO of its India REIT with an initial portfolio comprising four office parks in Mumbai, Gurugram, Noida and Kolkata spanning a combined 14 million square feet.

After a subscription period in which the offering was oversubscribed 8 times, the REIT’s shares were listed Tuesday on India’s NSE at INR 281.70, a 2.4 percent premium to the issue price of INR 275.