Blackstone is in talks with Singapore’s sovereign wealth fund GIC, to sell its 50 per cent stake in some of its commercial assets that it has with the Panchshil Group in Pune and with Salarpuria Sattva group in Hyderabad, three sources said.
The projects with 26 million square feet of leasable area have an enterprise value of $4 billion, and the deal could be somewhere around $1.5-2 billion sources indicated, depending upon the negotiations. The deal is still in the works and a lot will depend on the valuations and the final pricing, one of the sources indicated.
Of the total space, around 5 msf is under construction.
Panchshil’ s projects that are part of the deal are Eon Free Zone, Tech Park One, and ICC Tech Park, which also includes JW Marriott’s 415-key hotel and Pavilion Mall. The joint venture was formed in 2014. The projects in Hyderabad under the block that Blackstone has with the Salarpuria group are Knowledge City, Knowledge Capital, and Knowledge Park and the JV has been in effect since 2017.
There are other projects that Blackstone is developing and owns with the two real estate groups, and those are not part of the deal with GIC. Sources also made it clear that it was not exiting the joint ventures but selling its stake in some of the projects. There were also indications that while GIC was the frontrunner, there could be some others interested in the projects as well.
Blackstone declined to comment, while GIC did not respond to a query sent through a contact form on its website.
Reduced portfolio size
Originally, Blackstone had intended to include all commercial properties under its JVs along with its own office portfolio held under Nucleus Office Parks to form Asia’s largest real estate investment trust and list it. However, those plans have changed now with the US-based alternative asset management giant prioritising the monetisation of some of its real estate holdings in India.
A source said that the proposed REIT of its office portfolio was still part of Blackstone’s plans but with a reduced portfolio size.
For Blackstone, a key metric is distributable earnings and the fastest way to monetise a real estate asset is by selling it. It has to balance the maturity of its investments in terms of the returns it can generate through a sell-off with its long-term potential to get rents and monetise the value through a REIT listing.
The slowdown in the US and Europe, two major sources of Grade A office occupiers in India, has had an impact in terms of office absorption. According to workplace solutions firm Vestian, office absorption in the first half of 2023 in India fell 5 per cent y-o-y to 25.8 msf and in the June quarter it was down 6 per cent. Bengaluru, Mumbai, and Kolkata contributed the most to the fall.