CapitaLand Investment (CLI) has raised S$368 million ($273.1 million) in a first closing for its second India business park development strategy as the Singapore property giant expands its private funds business in the world’s largest country.
CLI on Thursday announced the launch of CapitaLand India Growth Fund 2 (CIGF2) with a goal of raising S$525 million to invest in grade A business parks in Chennai, Bangalore, Hyderabad and Pune. For the first closing the fund manager secured S$263 million from an unnamed global institution.
“We’ve got very strong interest from investors around the world,” Simon Treacy, chief executive officer for CLI’s private equity real estate division, said in an interview with Mingtiandi that same day. “Over the last six to nine months we’ve seen much more attention by global investors looking at the success that India is (seeing) economically. It is also benefiting from the strong return to work now.”
Treacy identified the fund’s backer as an organisation which has already worked with CapitaLand. The Singapore government’s Temasek Holdings owns a controlling stake in CapitaLand Investment, while the country’s sovereign wealth fund, GIC, backed an India business park fund managed by Ascendas (since merged into CapitaLand Group) which was the predecessor to CapitaLand India Growth Fund 2.
The fund is being seeded with a 70 percent interest in CLI’s International Tech Park Chennai, Radial Road (ITPC-Radial Road) development project in Chennai, which will deliver 2.6 million square feet (241,548 square metres) of grade A office space when completed in 2025.
The global investor will have a 50 percent stake in CIGF2 at its first closing, while CLI will hold a sponsor stake of 20 percent in the fund, while other investors were not identified. The new strategy is expected to add S$700 million to CLI’s S$89 billion existing funds under management.
In a deal which would value the property at around S$136 million, the fund paid S$95 million for its majority stake in ITPC-Radial Road, while the sponsor continues to hold the remaining 30 percent interest.
The business park includes two office blocks designed to achieve Net Zero for energy efficiency, water conservation and waste management as recognised by the Indian Green Building Council (IGBC).
Aiming to serve firms in the information technology sector and related service industries the campus is pre-certified as a Platinum project by the IGBC, which rates sustainable buildings in India. ITPC-Radial Road will also use digital twin technology in its building management system to improve efficiency in real time.
To help its future tenants compete in India’s growing battle for talent, the property also features shared amenities such as a food court, co-working space, medical centre, child care centre, health club, convenience stores and open spaces for collaboration.
Located at 200 Feet Radial Road within the Zamin Pallavaram business hub in the capital of Tamil Nadu state, ITPC-Radial Road will be completed in two phases with the first stage expected to be ready for use this quarter and the second around 2025.
In addition to ITPC-Radial Road, CLI has two more business parks in the city, ITPC Taramani, in the Taramani IT corridor and CyberVale IT Park within Mahindra World City.
India Leasing Gathers Steam
Sanjeev Dasgupta, CEO of CLI India, said the closed-ended fund is expected to provide a “pretty good return profile” to investors given the healthy pre-leasing activity in the sponsor’s project epipeline.
“The projects are under development but we have (pre-leases). Especially in one of the projects we are almost getting close to fully leased up so the projects have progressed quite nicely,” Dasgupta told Mingtiandi in the same interview.
With tenants already committing to the Chennai project, Dasgupta is confident of adding more assets to the strategy.
“We have an active deal pipeline at this point focused on Pune and Bangalore so we do think that over the next few months, we should have a much larger portion of the new fund committed,” he said.
CIGF2 marks the fund manager’s second business park development fund in India following the S$300 million Ascendas India Growth Programme, which launched in 2013 with Singapore sovereign wealth fund GIC as a principal investor. The strategy was closed and fully committed in 2015.
“India is a core market for CLI where our business parks enjoy high occupancy, fuelled by demand from multinational corporations and local companies from the IT / IT-Enabled Services industry,” Dasgupta said in a separate statement.
India in Style
With CapitaLand having nearly three decades of experience in India, its fund management team is confident of finding yield in a number of sectors on the subcontinent.
“Besides business parks, we see opportunities to invest in new economy assets such as data centres, logistics and industrial properties in India through our private funds,” said Treacy.
The group now manages a total of S$4 billion in India assets, including 20 IT and business parks, lodging properties and data centres, as well as industrial properties. Beyond Chennai, CapitaLand Investment’s India portfolio spans Bangalore, Goa, Gurgaon, Hyderabad, Mumbai and Pune.
CLI’s Chennai investment stands as the latest bet on India’s office sector this year by a Singapore player.
In May, GIC teamed up with Brookfield India REIT to buy two sets of commercial assets from Brookfield Asset Management worth a combined $1.4 billion. The portfolio sale, which gave the partners ownership of 6.5 million square feet of commercial space, included nine properties in Downtown Powai in Mumbai and 12 buildings at Candor TechSpace Sector 48 in Gurugram.
In February, Temasek-backed Mapletree Investments and Canada’s Ivanhoe Cambridge launched an India office joint venture with an investment capacity of over C$2.5 billion (then $1.86 billion).
A month earlier, Singapore property developer Keppel Land had acquired the Zen One office project in Pune, near Mumbai, for INR 2.37 billion (then $29 million), with that investment adding 1.1 million square feet of desk space to its India portfolio.