Asset managers Blackstone and Brookfield are said to be acquiring, in a pair of unrelated deals, a combined INR 1,450 crore ($211 million) of real estate in Mumbai, after private equity investment in India’s property market hit almost $4 billion in the first half of the year.
The US and Canadian investment giants’ most recent pair of Mumbai transactions have targeted the commercial and hospitality sectors, according to local reports, showing their continued appetite to bite deeper into a beleaguered India property market, as local developers struggle to finance projects amid a sector-wide credit crunch.
The two firms, which between them manage $331 billion of real estate assets globally, are reportedly executing this pair of transactions just under two weeks after Blackstone pulled off one of the largest property deals in India of the year, buying the One BKC office building in Mumbai for INR 2,500 crore.
Blackstone Adds to Business Park Portfolio
The New York-based firm, currently the largest owner of grade A office space in India with over 50 million square feet under management, is sticking with accommodating desks in this latest deal.
The US private equity giant is said by local media to have acquired the L&T Business Park, a complex of two ten-storey towers with a combined floor area of 407,000 square feet (37,812 square metres) in the upmarket neighbourhood of Powai to the northeast of Mumbai.
The 2010-vintage business park, which was developed by Indian conglomerate Larsen and Toubro, currently rents out at INR 145 per square foot per month.
JP Morgan, Amazon Internet Services and Colgate are all current tenants in the towers, which were reportedly fully-leased in January.
In March of this year Blackstone’s Embassy Office Parks REIT, a joint venture with India’s Embassy Group, raised $682 million from the IPO of its existing office park portfolio.
Brookfield Keeps Up Hotel Streak
Toronto-based Brookfield Asset Management, which already manages $3.5 billion in India real estate assets, is said to have signed a memorandum of understanding to acquire a five-star hotel and sports club, as well as an undeveloped land parcel, for INR 750 crore.
The Canadian firm would be purchasing the project from India hospitality firm Mars Enterprises and Hospitality, which is controlled by Scotland-based hotelier and restaurant-owner Sanjay Narang.
The 100-room Waterstones Hotel and sports club, which is a five-minute drive from the Chhatrapati Shivaji International Airport, occupies half of a 418,000 square foot (38,850 square metres) estate, allowing for a commercial redevelopment of approximately 1.3 million square feet.
Narang is reportedly selling the building and its site to raise cash after attempting unsuccessfully to sell the asset last year for INR 1,000 crore. Local media cites an anonymous source as indicating that Brookfield is paying 30 to 40 percent above the market rate of INR 60 – 70 per acre to acquire the property.
Asset Managers Increase their Slice of the India Pie
The two acquisitions are the latest in a string of India transactions involving the pair of private equity giants.
Just last month, Blackstone-backed Embassy Group bought a 39 percent stake in Indiabulls Real Estate for INR 2,700 crore.
In March, Brookfield Asset Management agreed to buy four hotels, a hospitality development project and branding rights to one of India’s elite hotel chains from Hotel Leela Venture for INR 3,950 crore, as well as the 1.2 million square foot ICICI Tower in Hyderabad for an amount between INR 1,000 crore and INR 1,200 crore.
In the same month, Blackstone bought a 50 percent stake in two of IBREL’s central Mumbai office properties for INR 4,750 crore.
These acquisitions by the global private equity titans are taking place as India’s developers struggle through credit difficulties, with ratings agency Fitch reporting in May that major India developer Lodha Developments, currently developing the Trump Tower in Mumbai, had insufficient cash flow to meet debt repayments falling due at the end of 2020 financial year.
Research firm Liases Foras reported in February that developers in India are having to repay twice as much in debt each year on average as the income they generate, while home prices in Mumbai fell by 11 percent last year.
As a further indication of market stress, Brookfield’s purchase of the Leela Hotels in March came after the hotel group had defaulted on INR 21.2 million in interest payments to a creditor, having built up a debt mountain of INR 36.6 billion.