Blackstone buys 49% of Indiabulls office rental business for $60 million

By Realty Quarter Bureau

Blackstone Group world’s largest private equity firm is all set to buy 49% of stake in the office rental business of Indiabulls Real Estate in a $600-650 million deal taking the entire portfolio around $1.2 billion.

This transaction will include landmarks in Mumbai Lower Parel such as One Indiabulls Centre and Indiabulls Finance Centre besides the One 09 building in Gurgaon and One Indiabulls Park in Chennai part of trend of overseas investors picking up select commercial properties in India.

The New York-based private equity fund, which is also one of the largest owners of commercial real estate properties in India, is looking to add more assets to its portfolio ahead of a planned real estate investment trust listing, multiple sources close to the negotiations said. It acquired the Express Towers building at Nariman Point in 2014.

Blackstone declined to comment. Indiabulls Real Estate didn’t respond to queries. “The negotiations are reaching the final stages and a definitive agreement could be signed before March 31,” said one of the people cited above.

Last year, DLF sold a 33.34% stake in commercial rental arm DLF Cyber City Developers to GIC for Rs 8,900crore.

DLF Cyber City has rent-yielding assets of 26.9 million square feet with annual rental income of over Rs 2,500crore. Indiabulls Real Estate’s annual rental income currently stands at Rs 720crore with a leasable area of 5 million sq ft, according to its FY17 annual report.

It has more than 200 marquee clients including Morgan Stanley, HSBC, Mondelez, WPP Group, Aditya Birla Financial Services and others.

The company has four other office projects under development, which will take annual rental income to Rs 1,357crore, the report said. In Mumbai, other than Express Towers, Blackstone also owns the 1.1million sq ft 247 Park, which it acquired from Hindustan Construction Co. (HCC) in 2016 for Rs 1,050 crore but missed out on Hiranandani’s Office portfolio which Brookfield acquired for a billion dollars.

Indiabulls reported a 45.82% rise in consolidated net profit to Rs 85.35crore in the third quarter ended December from Rs 58.53crore in the year-ago period.

Total revenue from sales rose to Rs 2,164.44crore from Rs 492.90crore. Net debt was Rs 4,205 crore at the end of the third quarter. Blackstone, the world’s biggest alternate asset manager, is the largest institutional investor in Indian property to the tune of $2.7 billion.

“Despite being a relative newcomer, its execution has been much better than peers. Cash flow generation is solid, with the company FCF-positive. We think the stock should see a significant re-rating over the next few quarters as earnings scale up, narrowing the gap to fair value.”