Ascendas India Trust is continuing to expand its Hyderabad holdings, as Ascendas Property Fund Trustee, the trustee-manager of the Singapore-listed trust, announced this week that it had entered into an agreement to purchase two to-be-completed buildings in the HITEC City business park in the capital of Telangana state.
The deal, which could be valued as high as S$278 million ($204 million), would add 1.85 million square feet (172,000 square metres) to the 3.3 million square feet already owned or under contract for purchase in the area by the Singapore-listed property trust. Ascendas Property Fund Trustee, is an affiliate of government linked Singapore property group Ascendas-Singbridge.
Under the terms of the transaction, Ascendas India Trust will provide funds to the project developer, Hyderabad-based Phoenix Group, for the construction of the buildings and then take full ownership of them upon completion and the payment of a yet-to-be-determined top-up amount.
New Assets are Adjacent to aVance Business Hub
“The proposed acquisition of aVance A1 & A2 will allow us to further strengthen our presence in Hyderabad, which is currently witnessing robust rental growth arising from healthy demand from global IT companies,” said Sanjeev Dasgupta, Executive Director & CEO of the trust manager. “The location within the city’s prime IT Corridor in Hi-Tec City is contiguous to aVance Business Hub where we own 1.5 million square feet.”
The buildings in the transaction are a part of aVance Business Hub 2, which will ultimately have seven structures set over 14.4 acres. Ascendas’ agreement covers aVance A1, with 860,000 square feet of leasable area, and aVance A2, with 990,000 square feet.
The deal has two stages. In stage 1, Ascendas India Trust will purchase debentures for S$157.8 million to fund construction. Another payment will then be made to complete purchase, the exact amount calculated using an agreed-upon formula that takes into account occupancy, rents and other relevant factors. The maximum including the debenture will be no greater than S$277.5 million.
Ascendas India Trust’s total portfolio will increase by 10.2 percent to 20 million square feet following the acquisition of the two buildings.
The aVance Business Hub 2 is located at Hyderabad Information Technology Engineering Consultancy City (HITEC City), which was inaugurated in 1998 and is sometimes credited with setting the stage for the country’s technology boom. Ascendas India Trust’s partner in the project is Hyderabad-based Phoenix Group, a diversified conglomerate with interests in property, mining and power.
Adding More Assets in a Popular Neighbourhood
At the 25.7-acre aVance Business Hub, which preceded aVance Business Hub 2, the trust already has four buildings and a total of 1.5 million square feet as well as share-purchase agreements in place for two more buildings, with total floor area of 1.8 million square feet.
In May of this year, Ascendas Property Fund Trustee announced that it had agreed to acquire seven buildings in the Hyderabad a business park on behalf of the trust, including paying a combined S$270 million ($200 million) for two of the buildings in southern India’s Telangana state, one of which is 98 percent occupied by Amazon.
The deal also gave the trust right of first refusal on an additional four buildings totaling 1.2 million square feet.
Occupancy at Ascendas’ aVance buildings was reported at 98 percent in a 25 July presentation, higher than the trust’s overall portfolio average of 96 percent and higher than the average occupancy in the area of 95 percent.
Ascendas India Trust inked a similar deal earlier in the year with construction funding and forward-purchase agreements for two buildings totalling 1.4 million square feet at the Aurum IT SEZ in Mumbai. The maximum consideration for that transaction was set at S$186 million.
India Portfolio Driven by Tech Occupiers
Ascendas India Trust has 27 percent of its space in Hyderabad, 32 percent in Bangalore and 22 percent in Chennai. Its top tenants include local and international finance and technology leaders, such as Bank of America, IBM, Societe Generale, The Bank of New York Mellon and UnitedHealth Group. Almost half of its tenants are in IT and 13 percent are in finance, although more than 80 percent of its space is used for technology-related endeavours.
In addition to its investments in seven IT parks, the trust diversified in February into logistics with the acquisition of six warehouses near Mumbai.
International interest in India has been strong lately, with investors such as KKR, the BlackStone Group, GIC and Brookfield Asset Management making significant commitments to the market. Knight Frank estimates that $2.6 billion poured into India property from overseas in 2017, while JLL sees an average of more than $5 billion a year entering the sector over the next decade.