Allianz, APG Invest $150M Each in Godrej India Office Development Platform 

The property investment arm of Allianz Insurance has committed $150 million to an office development platform in India set up by conglomerate Godrej Group, according to an announcement by the European insurer.

The joint venture, which is to be managed by Godrej Properties, is seeded with two of the developer’s existing office projects – one in Mumbai and another in Gurgaon – with a combined gross floor area of two million square feet, as well as a pipeline of 1.3 million square feet (120,774 square metres) in Bangalore.

Allianz Real Estate, acting on behalf of several Allianz companies, is taking a one-third stake in the closed-end platform as it plans to allocate up to 60 percent of its real estate exposure in Asia Pacific to fast-growing markets such as China and India. The Netherlands’ APG Asset Management had earlier invested its own $150 million in the initiative and will retain a 33 percent share.

Rushabh Desai, Allianz Real Estate’s chief executive officer for Asia Pacific, said in a statement that the company continued to believe in the long-term growth prospects of the Indian economy.

“Strong demographic trends and improving transparency are supporting real estate occupier as well as investor demand, in particular the office sector, which is ideal for long-term institutional investors such as Allianz,” Desai said.

The venture represents the third major India-focused partnership in three years for Allianz, following deals with warehouse platform ESR and India’s Shapoorji Pallonji Group in 2018 and 2017 respectively.

Taking Aim at India’s First Tier Cities

The property investment unit of the insurance titan, which manages €67.1 billion ($75 billion) in real estate assets globally, is tying up with Godrej for the first time as it bids to take a bigger slice of the office market that has attracted other foreign investors such as Blackstone and Brookfield.

The Mumbai-based group’s office development platform, which is known as Godrej Build to Core, or GBTC I, is a $450 million fund set up to develop premium offices in first tier cities in India.

Godrej announced the final close of the fund last week, saying that it was now in a position to invest or develop properties with a value over $1 billion.

“The build–to-core strategy that we commenced with Godrej Fund Management last year has had a very successful start with two first class acquisitions and a strong pipeline of future opportunities,” Graeme Torre, managing director of APG Asset Management Asia whose company had committed to the fund last year, said in comments published in India’s Business Standard.  “We are delighted to have Allianz Real Estate now join the partnership and look forward to seeing the portfolio further extended to provide exposure to India’s premium office sector.”

Desai said that Godrej is “one of the most trusted brands in India” with a successful track record in office development, adding that the German insurer was confident the conglomerate controlled by the wealthy Godrej family, which developed Bandra Kurla Complex’s only LEED Platinum-rated building, would deliver a premium office product that is increasingly sought after by multinational tenants operating in India.

Godrej Properties’ best known development, the 51-storey Godrej Planet in Mumbai, was the tallest skyscraper in India when it was completed eleven years ago.

Allianz, Godrej and APG will each own a third of the platform, while Godrej Fund Management will act as investment manager.

“Godrej Fund Management’s unique blend of strong development management and investment management capabilities positions us well to deliver on the opportunity to develop and manage world-class grade A office assets across India,” said Karan Bolaria, managing director and chief executive officer of Godrej Fund Management.

Third Partnership in Three Years

The deal comes nine months after Allianz announced that it was contributing an initial $225 million capitalisation to a 50:50 joint venture with ESR to acquire logistics facilities in India.

That warehouse investment, which ESR and Aliianz plan to build into a $1 billion platform, came after the insurance giant in October 2017 had joined forces with Shapoorji Pallonji Group to establish SPREF II, a Singapore-domiciled, Indian rupee-denominated fund with a $500 million target.

Allianz and APG are investing in the property fund after office absorption in India’s top seven cities increased by two percent during the first six months of 2019, compared with the same period last year, according to Colliers International.

Megha Maan, senior associate director at Colliers International in India, said that big-ticket deals seen in India at the beginning of the year have continued, with private equity inflows into real estate in the country for the first half of the year reaching $3.9 billion, representing a 26 percent increase over the corresponding period last year.

“Foreign investors are betting on India, led by a surge in commercial office demand, rising incomes and reforms initiated by the government,” she said, adding that Colliers expected 2019 to set a new record for investments in real estate, with investors viewing retail and logistics assets favourably.

Maan said that investors are aggregating prime commercial assets in a bid to list them as REITs, following the successful listing of the Blackstone-backed Embassy Office Parks REIT in March, which was India’s first publicly listed real estate investment trust.