German insurance entity Allianz Group has entered into a partnership with construction giant Shapoorji Pallonji Group to set up a $500-million real estate fund — SPREF II — which will invest in commercial office properties in India.
This will be a rupee-denominated closed-ended fund. Allianz AG will own 50 per cent of the fund and the remaining will be held by long-term institutional investors. The JV has a potential to buy out or develop close to $1.5 billion worth of commercial projects across the country.
This marks Allianz’s first real estate transaction in India and was conducted by Allianz Real Estate, the $63.5-billion real estate investment and asset manager within the Allianz Group, on behalf of several Allianz companies.
The deal forms part of Allianz’s strategy to allocate around five per cent of its global real estate portfolio to the Asia-Pacific region.
Francois Trausch, Global CEO, Allianz Real Estate, said in a statement, “India is strategic to the Allianz Group. In growth economies like China and India, real estate provides a scalable entry into the market for Allianz in terms of investments/asset management exposure.”
The platform’s strategy will be to leverage structural trends in six tier I cities to build a long-term, cash flow producing office portfolio by acquiring a blend of develop-to-core, forward purchases and stabilised or stabilising assets.
The six target cities are Mumbai, Bengaluru, Hyderabad, Pune, Chennai and Delhi-NCR.
Rushabh Desai, CEO, Asia-Pacific CEO, Allianz Real Estate, said, “We are looking to deploy approximately 60 per cent of our Asia-Pacific allocation to growth economies. The Indian economy has been consistently outperforming. Strong secular growth, stellar demographic trends, and improving transparency are supporting stable real estate occupiers as well as investor demand, in particular the office sector which is ideal for long-term core investors like Allianz.” Shapoor Mistry, Chairman, Shapoorji Pallonji Group, said: “We view this partnership with Allianz as the first step in a relationship which will focus on creating long-term value for the investors”.
The venture will be supported locally by the Shapoorji Pallonji Investment Advisors team led by Rajesh Agarwal.
Shapoorji Pallonji group has a $200-million Canadian Pension Fund Plan (CPPIB) for developing office space.
This is in addition to $250 million equity JV with IFC (subsidiary of World Bank) and Asian Development Bank to develop affordable housing projects pan-India. Currently, three projects are at various stages of development.
JLL, which facilitated the deal, said that the deal by Allianz is the latest in a series of high-profile investments into the Indian real estate by institutional investors this year. Recent transactions include Singapore sovereign wealth fund GIC’s $1.4 billion joint venture with DLF Cyber City Developers for a portfolio of office and retail assets across India in August; CPPIB’s investment of $500 million in a JV with Indian property developer Indospace in May; and Blackstone’s investment into K Raheja Corp’s Mindspace business park portfolio in March.
Shobhit Agarwal, Head - Capital Markets, JLL India, said: “There has been increasing interest in Indian real estate opportunities and among international investors, pension funds and insurance companies are keen on participating in the Indian growth story. Mumbai, NCR and Bengaluru are the top three cities for investors with these cities having received more than two-thirds of total investments”.
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