Blackstone Buys Out India Office Portfolio for INR 44B, Checks Out Warehouse Deal

Blackstone has reached an agreement to take control of an Indian office portfolio and is said to be negotiating its first logistics investment in the south Asian nation.

Following the successful launch of its Embassy Office Parks REIT in March of this year, Blackstone has reached a preliminary agreement to acquire the remaining 50 percent stake in the commercial real estate assets of developer Indiabulls Real Estate for INR 44.2 billion ($620 million), according to a regulatory filing.

In separate discussions, the New York-based private equity firm is negotiating an INR 15 billion investment in a logistics development joint venture with Mumbai-based Allcargo Logistics Ltd.

The Indiabulls Real Estate investment had been reported to be in the works for the last few months, with this latest milestone, along with the potential logistics joint venture, hitting the headlines during the same week that Blackstone announced that it had closed on $20.5 billion in fresh capital for Blackstone Real Estate Partners IX, the firm’s latest global property fund.

Indiabulls Assets Change Hands

Already India’s largest commercial landlord, the acquisition of the stake in Indiabulls Real Estate expands Blackstone’s collection of Indian offices and comes after the private equity firm paid just less than INR 47.5 billion to acquire 50 percent of Indiabulls existing commercial portfolio in March of this year.

Indiabulls has confirmed signing the term sheet, according to an account in the Economic Times, while Blackstone representatives confirmed the regulatory filing in response to inquiries from Mingtiandi. Earlier news reports indicated that Blackstone would be purchasing the Indiabulls assets through a joint venture with India’s Embassy Group, the private equity group’s partner in the Embassy Office Parks REIT.

The transaction would give Blackstone control of five million square feet (464,000 square metres) of office space, including taking over 100 percent of the One Indiabulls and Indiabulls Finance Centre buildings in Mumbai, as well as another building in the city of Gurugram, in India’s National Capital Region.

Blackstone had already begun buying up assets from Indiabulls last year including spending INR 8.5 billion to acquire a Chennai office complex from the company in July 2018. In March of 2018 Blackstone had bought 50 percent stakes in Mumbai’s One Indiabulls Center and Indiabulls Finance Centre as part of its initial portfolio investment with Indiabulls.

In June of this year Embassy Property Developments, a subsidiary of Blackstone’s partners at Embassy Group had purchased a 14 percent stake in Indiabulls Real Estate from Indiabulls group chairman Sameer Gehlaut through a bulk purchase on the stock exchange.

According to local press accounts at the time, that purchase was part of an agreement for Blackstone and Embassy Group to buy out Gehlaut’s 39.5 percent stake in the listed developer through a series of transactions originally slated for completion this month.

Indiabulls Group is moving away from the property sector to focus on financial services with the company said to be using the proceeds of its portfolio sale to pay down INR 45.9 billion in debt racked up by its real estate unit.

More Cash Headed for India’s Logistics Sector

At the same time that Blackstone is taking up more office space the fund manager is also reported to be looking into opportunities in India’s warehouse sector through the joint venture with Allcargo Logistics.

Allcargo has a plan to develop five million square feet of warehouse space in India by 2021, according to an account by Bloomberg, with Blackstone said to be one of a number of investors holding discussions with the logistics firm about the development joint venture.

The deal, which is said to still be under discussion, would involve Blackstone paying INR 15 billion for a 51 percent stake in the partnership.

In June of this year Blackstone paid $18.7 billion to acquire the US portfolio of Singapore’s Global Logistic Properties (GLP). That warehouse investment came after the private equity firm run by Trump confidant Stephen Schwarzman had sold its Logicor European logistics platform to China Investment Corporation in 2017 for €12.25 billion (then $13.82 billion).

In China, Blackstone has a logistics joint venture with developer China Vanke.

Becoming a Private Equity Real Estate Favourite

Should Blackstone follow through on its pair of India deals they would mark the latest high water marks in a crescendo of bets on the country’s property sector by global fund managers.

In May of this year New York-based Warburg Pincus committed $400 million to a shopping centre development platform joint venture with Mumbai-based developer Runwal Group, a move which came after ESR, a warehouse developer backed by the private equity firm had set up a $1 billion India logistics joint venture with Allianz Real Estate last year.

Finance giant Morgan Stanley also has gambled on Indian sheds this year, investing $49 million in February to take a majority stake in a Pune-based industrial developer.

In December last year GLP had set up a $1.2 billion fund to back the expansion of its Indospace India warehousing joint venture.