Blackstone Signs Deal to Buy $1.6B in India Commercial Properties

Less than half of a year after launching its second India REIT IPO, Blackstone could be heading for another trip to the bourse, as the US private equity giant signs a preliminary deal to purchase $1.6 billion in commercial property in the southern half of the country.

In a statement to the National Stock Exchange of India on Saturday, Prestige Group revealed that it had signed a non-binding letter of intent with entities acting on behalf of Blackstone funds for the sale of office, retail and hotel properties belonging to the Bangalore-based developer.

Following the preliminary agreement, which also includes the sale of mall management and maintenance businesses belonging to Prestige, the two parties have entered exclusive talks regarding Blackstone’s potential acquisition of the assets or formation of joint ventures or partnerships.

The stock exchange notice did not mention monetary figures for the potential sales, however, local news reports citing sources familiar with the talks indicated that Blackstone had signed term sheets to purchase assets with an enterprise value of INR 120 billion ($1.63 billion).

Blackstone’s Mindspace REIT, a joint venture with India’s K Rajeha Corp, held a $476 million IPO in late July. Embassy Office Parks REIT, a joint venture between Embassy Group and Blackstone, became India’s first REIT with a $773 million 2019 IPO.

Focusing on Southern India

With the first-step agreement in place, the two parties will now enter into negotiations involving setting a final deal structure, as well as conducting due diligence, with a formal agreement expected by the end of November, according to local press reports. Contacted by Mingtiandi, Blackstone representatives declined to comment byond what was included in Prestige’s filing.

Earlier reports regarding the deal had estimated that Blackstone would be acquiring eight to 10 properties from Prestige, spanning a total of 15 to 20 million square feet (1.4 million to 1.9 million square metres), including both completed properties and projects under construction.

The hotels included in the prospective deal would yield a total of 336 keys, according to an account in the Deccan Herald. Prestige lists nine hospitality properties on its website, including assets under the Conrad, Sheraton and Oakwood brands.

Led by Indian billionaire Irfan Razack, Prestige Estates, the development division of Prestige Group has a collection of 10 operating shopping malls in Bangalore, Chennai, Mysuru, Mangalore, Hyderabad and other major cities in southern India. The company’s website lists eight office properties in Bangalore and one more in Chennai.

With their popularity as tech development locations, Bangalore and Chennai have seen their office rental values hold up comparatively well in 2020, according to agency research, with a report from Colliers International projecting that Bangalore office properties could be among Asia’s best performing over the coming five years.

Blackstone Buys Up More of India

Having achieved a pair of successful REIT IPOs over the past 18 months, Blackstone has continued to expand its role as India’s biggest real estate investor.

Local press reports indicate that the private equity giant has now invested some $8 billion acquiring and developing real estate in India, and a separate report today tied Blackstone to talks with Pune-based developer Panchshil Realty about a potential joint venture aimed at a REIT listing for the luxury specialist’s properties.

Blackstone has also taken aim at India’s logistics sector, with the company led by Stephen Schwarzman late last year committing $175 million to a joint venture with Mumbai-based real estate giant Hiranandani Group to build 12 million square feet of industrial properties in the country.

Also last year, the fund manager spent $620 million to acquire an office portfolio from Indiabulls Real Estate which gave it rights to commercial assets in Mumbai and India’s National Capital Region.

At the end of last month Blackstone’s Canadian-based rivals at Brookfield Asset Management made their own filing for an Indian REIT IPO, registering a draft document for a $599 million offering, just one day after receiving government approval to acquire a commercial portfolio from Bangalore-based RMZ Corp.