The Canada Pension Plan Investment Board (CPPIB) is ready to take a bigger slice of India’s commercial real estate market as it teams up for a second office joint venture with RMZ Corp with an INR 26.5 billion ($350 million) investment, according to a joint release on Monday.
The JV is seeded with RMZ’s StarTech grade A office tower in the southern India city of Bangalore, with CPPIB buying a 51 percent stake in the property from local developer Prestige Estates, while RMZ will retain the remaining 49 percent.
“We continue to identify high demand for premium commercial office space in top city locations in India, such as Bangalore,” Hari Krishna, managing director for India real estate at CPPIB. “As the city grows as a destination for technology businesses and start-ups, we are working alongside market leaders, such as RMZ, to grow our portfolio to support the demand.”
The Toronto-based pension fund is expanding its partnership with RMZ less than a year after committing $210 million to its first office venture with the Bangalore-based developer as it continues to pursue opportunities in India’s southern region – one of its favored investment locations over the past seven years.
Focus on High-End Office
CPPIB second JV with RMZ – the largest privately-owned real estate firm in India – focuses on on developing, acquiring and holding mixed-use office buildings in key cities across India including Bangalore, one of the country’s fastest growing cities in the south.
Including the assets in the first venture, RMZ corporate Chairman Manoj Menda said the two JVs aim to develop projects worth at least $2.5 billion.
The lead-off asset for this latest joint venture, StarTech was completed in 2020, and spans 1.37 million square feet (127,277 square metres). The 10–storey tower is primarily designed for office use but also includes areas dedicated for food and beverage units
Occupying an 8-acre (3.24 hectare) site in the Koramangala Industrial Area, southeast of Bangalore, the tower is currently 100 percent occupied by mostly tech startups and IT firms, including business process outsourcing firm Accenture Solutions India, online transport startup ANI Technologies and digital lending app provider Navi Technologies.
CPPIB is buying its 51 percent stake from Prestige Estates for INR 19 billion ($251 million), based on a filing to the local bourse on Monday,
“We are delighted to expand our relationship with CPP Investments,” Menda said. “This joint venture will provide RMZ additional opportunities to forge new strategic financial co-investments and remain ahead of the curve whilst also significantly increasing capital allocation to the core and development asset portfolios.”
Company representatives from RMZ and CPPIB did not respond to queries when asked for further details regarding the partnership.
Established in April last year, the first JV was seeded with three grade A developments that will provide 10 million square feet of new office stock upon completion of the four-tower RMZ Nexity campus and the RMZ Spire complex in Hyderabad, as well as the RMZ One Paramount commercial complex in Chennai.
With C$550.4 billion ($432 billion) of assets under management as of end-2021, CPPIB is the biggest pension fund in Canada and the ninth largest state-backed fund in the world based on total assets.
Krishna said the fund’s latest investment in the country remains in line with CPPIB’s overall focus on generating “solid long-term returns” for its more than 20 million contributors and beneficiaries.
India has been one of its favourite investment locations in Asia since CPPIB set up a local headquarters in the country in 2015 with the establishment of that beachhead being followed by a string of partnerships including its $500 million commitment to an India logistics JV with Indospace in 2017.
Also in 2017, the fund manager committed $246 million to an India retail real estate joint venture with local developer Phoenix Mills, and followed up on that late last year with its $180 million investment in a Phoenix Mills commercial project in Mumbai.