Office developers in India seek to monetise assets amid rising investor interest

Mumbai. Photo: Sergio Souza/unsplash

Leading commercial property developers in India such as DLF Ltd, Prestige Group, Embassy Group, RMZ Corp., K Raheja Corp. are looking to raise funds to expand their portfolio, pare debt and monetize their assets at a time of high institutional investor interest in office projects.

The companies are looking to raise equity as well as debt, either through private equity (PE) firms and global investors, or through a real estate investment trust (REIT).

DLF, India’s largest real estate firm, is looking to raise capital from PE funds for a few planned commercial projects, said a company spokesperson. Having significantly reduced its debt by selling promoters’ stake in its rental arm to GIC Pte Ltd, DLF has land parcels where it intends to develop office projects.

Bengaluru-based Prestige Group has a three-pronged strategy to monetize its commercial real estate portfolio, which includes strata sales in selective under-construction office projects to retail investors, bringing in a strategic investor for a portfolio of its under-construction projects and finally, deciding if REIT is the ideal route for its mature, yielding assets.

“Our office portfolio is expanding and we have around 12 million sq ft of office space under construction and a similar amount in planning stage. These are spread across not just the south but also Pune and NCR (National Capital Region) and we are looking at different strategies to monetize them,” Prestige chief executive Venkat K. Narayana said.

This year has been crucial for the commercial real estate sector, particularly office, with large investments, increase in rentals, robust demand for space and the launch of the country’s first REIT by Embassy Office Parks. Office space deals in the first nine months touched 47 million sq ft, up 30% from a year ago, according to CBRE South Asia, and may touch an all-time high of 60 million sq ft by 31 December.

Most office developers are investing to bolster their portfolios and are also looking to monetize their holdings to extract the maximum value.

Embassy Group, which along with Blackstone Group Lp, launched a REIT earlier this year, is now looking to divest some of its own assets to reduce debt and create cash reserves, Embassy chairman Jitu Virwani said in October.

Embassy last week extended a right of first offer (ROFO) invitation to the REIT to buy about 8.7 million sq ft of space in Embassy Tech Village in Bengaluru, that could be valued at around ₹6,000 crore. Blackstone has invested $1.6 billion in commercial realty in India from January to September.

On the REIT front, Mumbai-based K Raheja Corp., which has office parks in west and south India, is gearing up to launch its REIT early next year.

Shobhit Agarwal, managing director and chief executive, Anarock Capital, said there is strong investor interest to deploy equity in not just office assets but also rent-generating assets in retail and warehousing. This, even though there is a dearth of equity providers for residential projects.

“Rental and occupancy rates are going up, the REIT was successful, there are no defaults and all the big office developers are doing well, leading to investments happening at marginally sharper rates. Deal sizes are getting bigger. With every transaction, a new record is being created,” he said.

Bengaluru-based developer RMZ Corp. is looking to raise institutional capital, both equity and debt, for its Chennai, Bengaluru and Mumbai projects, said a person familiar with the development. An RMZ spokesperson declined to comment on the fund-raising plans.

However, Niranjan Hiranandani, co-founder and managing director of Hiranandani Group, believes that it’s a good time to hold on to mature rental assets, if there is no urgency. “…Values (of office assets) can only go up. We are not looking to monetize right now, but will look at it when we can use the liquidity to go to the next level,” he said.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.