Ascendas India Trust To Buy Two Industrial Assets in Chennai for $20M 

Singapore-listed Ascendas India Trust is making its second industrial investment in India just two months after its sector debut in May, committing around INR 1.56 billion ($20 million) to acquire a pair of facilities in Chennai.

The trustee-manager, Ascendas Property Fund Trustee, has entered into a forward purchase agreement with local developer Casa Grande Group to acquire Phase 2 of its Casa Grande project in the Mahindra World City integrated business park. In its May acquisition, Ascendas Property Fund had agreed to acquire the first phase of the Casa Grande development.

Under the agreement, the trust is investing INR 50 million to buy a 20,000 square foot pre-leased facility and provide another INR 600 million to fund the construction of the adjacent, 290,000 square feet industrial building that is expected to be completed by the second half of 2023.

The move follows a series of acquisitions by the trust controlled by Singapore property heavyweight CapitaLand Investment, and comes on the heels of a reported plan to buy a portfolio of office projects from the real estate arm of Indian conglomerate Larsen & Toubro Group, and two months after it purchased its first industrial facility in the country.

Growing Presence in Chennai

In addition to acquiring the two facilities, Ascendas Property Fund Trustee, a wholly owned subsidiary of CapitaLand, said it has also agreed to take over the Casa Grande unit in charge of developing the facility under construction, once the property is built and has completed a 12-month stabilisation period.

This latest deal will add 310,000 square feet of leasable space to Ascendas India Trust’s portfolio, according to a regulatory filing on Thursday. At the INR 1.56 billion price point, the trust is paying the equivalent of  INR 5,032 per square foot, including construction costs, pre-agreed capitalisation rate and rentals for its new assets.

The latest acquisition increases the trust’s presence in Mahindra World City to three structures, with the 410,000 square foot facility acquired in May already leased to a “leading electronics contract manufacturer.” The second building has been pre-leased to an unidentified company while the third asset is under construction.

“The full leasing of Casa Grande – Phase 1 validates our assessment of the demand for industrial assets in this location,” said Sanjeev Dasgupta, the trustee-manager’s chief executive officer. “The proposed Casa Grande – Phase 2 acquisition provides an opportunity to increase exposure to the industrial sector and expand our presence in Mahindra World City, a prime industrial corridor in Chennai.”

Located the capital of Tamil Nadu state in southeastern India, Mahindra World City is being promoted as the country’s first-ever integrated business city and occupies a 1,500 acre (15 hectare) site.

The industrial park is home to blue chip multinationals including German luxury car maker BMW, German chemical company BASF, Japanese transport system supplier Fujitec and German pharmaceutical firm B. Braun.

Commercial Acquisitions in the Works

“The transaction offers further diversification into the industrial asset class, which remains resilient, especially during the pandemic,” the trustee-manager said in a presentation to investors.

The proposed acquisition will enlarge the REIT’s portfolio by 1.2 percent to 25.3 million square where it will join a set of eight IT parks, one logistics park and a data centre development project, among others.

When both projects are stabilised, the REIT’s manager expect them to generate an estimated S$1.3 million ($930,000) in pro forma net profits once both assets have stabilised, and to increase distributions for unitholders to S$7.81 from S$7.80 currently.

Aside from the industrial sector, Ascendas India Trust is also actively expanding its presence in the commercial segment with an account by local daily The Economic Times showing that it is in talks with L&T Realty for a possible acquisition of a set of commercial development projects across Bengaluru, Chennai and Mumbai.

Should that deal, which could reach INR 25 billion in value, be consummated, it would increase the trust’s portfolio by more than five million square feet of commercial space.

E-commerce, 3PLs Drive Sector

Data from Cushman & Wakefield shows that industrial property investments accounted for 7.9 percent of all INR 57.9 billion ($77 million) deals recorded in India during the first quarter, led by another Singapore investor – Mapletree Logistics Trust – which in January spent INR 1.1 billion to pick up a 55 acre site in Bengaluru.

Other overseas investors are also moving to expand their Indian presence, including Hong Kong’s Gaw Capital Partners which earlier this month launched its operations in the country under the leadership of former Macquarie Asset Management executive Nitin Gupta.

In May, North American investors Bain Capital and Ivanhoe Cambridge teamed up with development giant Lodha for a $1 billion industrial partnership to develop a portfolio o logistics and light industrial parks across the country’s major cities.

The fast-growing e-commerce and third-party logistics sectors will likely help boost warehousing demand in India further, with a report by Knight Frank estimating that annual warehousing transactions in India will grow at a compound annual growth rate of 19 percent to 76.2 million square feet by 2026 from just 31.7 million square feet of available space in 2021.