US private equity firm Blackstone has acquired a grade A office building in Mumbai for Rs 2,500 crore ($358 million), in one of India’s biggest office property deals this year, according to local media reports.
Owned and developed by Mumbai-based luxury real estate developer Radius, Blackstone has reportedly bought A Wing and part of B Wing of One BKC, an the eight-storey commercial project located in the Indian mega-city’s Bandra Kurla Complex (BKC).
The high-profile building in Mumbai’s financial district covers a gross floor area of 1.5 million square feet and is fully leased to well known multinational corporations such as Facebook, Bank of America Merrill Lynch, Cisco, Amazon and Brookfield.
Picking Up a Prime Mumbai Office Project
“It’s a much sought after grade A building in Mumbai,” a person familiar with the matter said in the locla media accounts. “There is no building like this in BKC, which is 100 percent let out, especially to large multinational companies,”
Under the terms of the agreement, Radius will hold an option to buy back 40 percent of the area being sold now from Blackstone under a call option. The option can be exercised any time over the next two years and with the buyback agreed to be transacted at prevailing market rates at that point of time, reported India’s Economic Times, citing an unnamed source.
Radius will use the proceeds of this sale to repay a Rs 1,650 crore loan it owes to New Delhi-based mortgage lender Indiabulls Housing Finance for the development of the office building. The builder will also pay Rs 550 crore to the Mumbai Metropolitan Region Development Authority (MMRDA) as the remaining premium for the additional Floor Space Index (FSI) rights Radius bought to develop the plot.
Blackstone Expands in India
Blackstone has been on a buying spree in India to that has seen it invest $5.4 billion in 33 real estate projects in the country, with $4 billion sunk into office assets alone.
The private equity firm is said to be also working on buying out another Mumbai project, Adani Realty’s 800,000 square foot Inspire, for a reported Rs 1,900 crore. That property is about one kilometre northwest of One BKC.
In March, Blackstone-backed developer Embassy group launched India’s first real estate investment trust (REIT) worth around Rs 4,750 crore, which has risen 21 percent in value since its listing, beating indexes that track REITs in Singapore and Japan.
The Embassy Office Parks REIT operates around 33 million square feet of office space spread across seven office parks and four prime city-center office buildings across India, including projects in Bengaluru and Mumbai.
In 2018, Blackstone also expanded its holdings through agreements with Indiabulls Real Estate Ltd, including a December purchase of a 50 percent stake in two of the listed developer’s commercial properties in Gurugram for Rs 464 crore (around $66 million).
In March, the US finance giant bought a 50 percent stake in Indiabulls’ flagship office assets in central Mumbai — One Indiabulls Centre and Indiabulls Finance Centre – at an enterprise value of Rs 9,500 crore (around $1.46 billion).
India Remains an Investor Favourite
Other global private equity investment firms have also been in the race to buy out the subcontinent’s grade A office assets.
In August last year, Singapore’s GIC acquired a 49 percent stake in Provenance Land, the developer of India’s first Four Season hotel for $143 million, and in April 2018 Canada’s Brookfield Asset Management acquired the 1.2 million square foot ICICI Tower in Hyderabad, in a deal valued at between Rs 1,000 and Rs 1,200 crore.
According to a report by real estate advisory firm Knight Frank, office rents in Bengaluru and Mumbai saw an increase of 17 percent and 5 percent year-on-year, respectively, in the first half of 2019.
This follows a strong performance in 2018, due to an undersupply in both markets, and strong demand from technology firms. Delhi also saw a 1.4 percent rise in rents in its prime office segment.