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Global funds make a beeline for realty assets in Bengaluru

October 21, 2020

Global funds make a beeline for realty assets  in  Bengaluru

Bengaluru-based RMZ said on Monday it sold 12.5 million of its real estate assets to Canada’s Brookfield for $ 2 billion, including the joint operating company CoWrks. Last week, another Bengaluru developer, Prestige Group, signed a deal with Blackstone to sell assets for rental income of approximately $ 1.6 billion.

Global investors such as Blackstone Group Lp and Brookfield Asset Management continue to snatch assets from rental-producing offices in India, despite the Covid-19 coronavirus halting a seven-year rally in commercial real estate.

Bengaluru-based RMZ said on Monday it sold 12.5 million of its real estate assets to Canada’s Brookfield for $ 2 billion, including the joint operating company CoWrks. Last week, Prestige Group, another Bengaluru developer, signed a deal with Blackstone to sell its rental assets for approximately $ 1.6 billion.

RMZ and Prestige, two largely family-owned companies, will use most of the proceeds from the sale to reduce debt and the remainder to build and operate projects.

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After paying off the debt, Prestige and RMZ will each have roughly Rs. 3,500-4,000 crore in capital to invest in growth, a person familiar with the matter said on condition of anonymity.

Investor enthusiasm stems from the weak outlook for the leasing and leasing businesses in the next two years. Analysts attribute this primarily to the success of the country’s two Real Estate Investment Trusts (Reits). The inclusion of Embassy REIT in 2019 and the inclusion of Mindspace Business Parks amid the pandemic, both backed by Blackstone as majority and minority shareholders respectively, have enhanced investor confidence in the office sector.

Investors are betting on income-generating assets without development risk, since the returns are better than those of foreign countries and the occupants are multinational companies. But most importantly, the success of REITs has been crucial because it now provides them with an easy and consistent way out, ”said Anchuman Magazine, CBRE President and CEO of India, Southeast Asia, West Asia and Africa.

Blackstone is the largest office owner in India, with a portfolio of 118 million square feet across 44 assets in six cities.

On the other hand, Brookfield is a new company that entered and completed its first big business in 2014, when Unitech Corporate Parks bought. I recently filed a draft proposal document with the markets regulator to raise around Rs 4,400 crore through REIT. The IPO could be launched later this year.

Brookfield has nearly 40 million square feet of operating assets, with a strong presence in the North and East, and with the RMZ deal, in South India. Unlike Blackstone, it has no joint venture partners and has 100% ownership of all its assets. Another person familiar with the development, on condition of anonymity, said that once Reit was on the list, it would grow him even more in the future.

As part of the RMZ portfolio purchase, Brookfield will now also manage the former joint venture in the country.

After buying these assets, Brookfield and Blackstone are likely to fix them, followed by Rhett in 2-3 years, but they have long-term money and are in no rush, said Shobhit Agarwal, MD of Real Estate Advisors. Anarok Capital.

Spokesmen for Blackstone and Brookfield did not respond to inquiries.

JLL Property Consulting and Head of State Ramesh Nair said developers like RMZ and Prestige have taken on a lot of debt to grow the portfolio and recent sales will help them balance their levels of leverage.

The commercial sector has gone through a full cycle. To get real returns, they need to sell and the returns can be increased. Globally, real estate funds have $ 300 billion in dry powder, with Blackstone and Brookfield being the largest, Nair said.

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