In its first significant commercial office deal in Hyderabad, Xander Investment Management Pvt Ltd, the real estate private equity arm of global investment firm The Xander Group Inc., will invest $350 million for the development and subsequent acquisition of 4.5 million sq. ft of office space in developer Phoenix Group’s project.
Xander will finance the development of the Hyderabad office project over the next few years and, once it is completed, will acquire the asset. It is a “develop-to-core” strategy, where the investor funds a development project and stays on until it becomes a rent-yielding, stabilized asset.
The Hyderabad office project is located in the city’s financial district of Gachibowli, and the buildings will be delivered in phases between 2020 and 2023.
Xander had till now primarily invested in residential projects in Hyderabad. “Hyderabad is an exciting market for us and we are exploring more office and shopping mall deals in the city,” said Rohan Sikri, senior partner, Xander Investment Management.
Xander’s Hyderabad deal is similar in nature to a 2017 deal with Shriram Properties in Chennai, wherein it had invested $350 million in a partly-developed information technology (IT) special economic zone (SEZ).
In Hyderabad, Xander is playing an active role in the planning, design and execution of the project, along with Phoenix Group.
“This develop-to-core acquisition in Hyderabad fits nicely with our existing fully-owned, value-added office portfolio. At this point, the risk-return metrics that many office development opportunities present are attractive. Our intimate knowledge of office markets and tenant demand allows us to distil actionable data,” said Arpit Singh, principal at Xander Investment. “We intend to expand our develop-to core office investment strategy as the right opportunities present themselves.”
Earlier this year, Xander Group had bought an office building of around 250,000 sq. ft at Embassy Golf Links Business Park in Bengaluru for ₹350 crore from the Sanjay Ghodawat Group.
Hyderabad is fast gaining momentum among investors, multinational occupiers and developers, giving its commercial office market a boost big enough to challenge Bengaluru’s top position.
The city is expected to complete 33 million sq. ft of commercial office space between 2018 and 2021, increasing its stock by 60%, compared to around 23.7 million sq ft of new office space supply in Bengaluru, according to Colliers International India.
In May, Indiabulls Dual Advantage Commercial Assets Fund had bought an office complex, Phoenix Trivium, developed by Phoenix Group, in Hyderabad for around ₹470 crore.
Avinash Chukkapalli, director, Phoenix Group said: “We at Phoenix are focused on delivering best-in-class real estate products within Hyderabad. To achieve this, we look to establish long-term mutually rewarding partnerships with our land owners, tenants, customers, clients and strategic investors.”
This article was first published on livemint.com