Realty favourite for Blackstone

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Blackstone, the largest alternative asset manager in the world, has put slightly more money in Indian real estate than in its private equity (PE) business since it set shop here in 2006.

According to data released by the US company, of the $5.1 billion (Rs 33,900 crore) it has invested here, $2.7 bn (Rs 17,900 crore) is in real estate, in 18 transactions. As against $2.4 bn (Rs 15,914 crore) across 21 deals in PE since 2006.

It manages assets of $93.2 bn in real estate globally as against $91.5 bn in PE. Blackstone managed a record $333.9 bn in assets globally as of the end of September.

To put the India figures in perspective, about $13.7 bn of foreign funds have come into real estate since 2005, after these were allowed, according to the department of industrial policy and promotion.

What is interesting is that much of Blackstone’s money has come after 2008, when the other foreign funds had either shut shop or scaled back their investments in Indian real estate after the global financial slowdown. According to PE experts, the amount invested by Blackstone is the highest by any PE in Indian real estate since 2005.

Blackstone did not respond to a mail on the subject. It is learnt that 11 people work in Blackstone’s real estate division versus 14 in PE, in Mumbai.

“They invested a lot of money in information technology parks And Special Economic Zones which were classified as infrastructure and not as real estate when everyone was investing in residential assets. It could have backfired but they got good deals, as there was no competition for the first three to four years,” said Shobhit Agarwal, managing director, capital markets, at JLL India.

Adds Ashutosh Maheshwari, managing director and chief executive of Motilal Oswal Investment Advisors: “Blackstone has done a good job, given that they were early in the game and got (annual) yields of 14 to 15 per cent. Now, cap rates are down to nine to 10 per cent as more players have come into the market.”

According to Rajeev Talwar, executive director at DLF, the country’s largest listed developer, Blackstone could build a portfolio of $4-5 bn in the next couple of years. “They have invested in real estate assets which might not give them windfall gains but will give them steady returns and increase in asset value. They do not talk of amounts less than Rs 1,000 crore,” he said.

Blackstone manages $456 million of Bank of America Merrill Lynch Asia’s fund assets in India. This includes a joint venture with DLF.

The data also revealed that Blackstone, globally known for buyouts, has done more of these in real estate than in PE here. That included buying out 247 Park in Mumbai, Alpha One Malls in North India, office parks in Pune and Noida from IDFC, and others.

Recently the group raised $18 bn for a global buyout fund. Blackstone has said it has 30 million sq ft across 16 office parks, making it the largest operator of these in the country. DLF has 27.5 mn sq ft of operating office properties.

“Their plan is to hold the assets for the long term and exit once these mature,” said a senior executive of a property development company which has done deals with them.

Blackstone has a joint venture with the Embassy group for office parks. It had looked at floating a $2-bn Real Estate Investment Trust (REIT) but did not go ahead due to issues with the regulations. A REIT would have given Blackstone exits in some of its investments.

“They would definitely look at floating a REIT but if that does not happen, they could also look at an IPO (initial public offer of equity) or sell out to other investors eventually,” the executive said.

Though Blackstone has started with and focused more on office assets, of late it has also invested in malls and housing projects. According to sector executives, the firm could look at diversifying the portfolio.


BLACKSTONE IN INDIAN REAL ESTATE

  • Invests out of BREP(2) VIII, its $15-billion global fund and BREP Asia
  • Manages $456 million of ML-Asia fund’s assets in India
  • Team of 11 professionals based in Mumbai

Invested $ 2.7 billion across 18 transactions

Manages 30 million sq ft; largest operator of office parks

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