US firm Blackstone inks India’s biggest commercial deal

US RealBANGALORE: US private equity firm Blackstone has inked India’s biggest commercial real estate acquisition deal, which will give it 50% stake in a Bangalore builder-owned portfolio of three business parks for $200 million (over Rs 1,000 crore).
The deal beats Citigroup’s acquisition of a Mumbai office building earlier this year for Rs 985 crore, which was bigger than Maple Tree’s Rs 800-crore buyout of 2 million sq ft from Assetz Global Technology Park and Baring PE Partners’ Rs 500-crore investment in RMZ Corp for 6 million sq ft space.
A person familiar with the matter said that Blackstone, which invests in realty firms, has bought stake in an SPV comprising three commercial properties totaling over 10 million sq ft – Embassy Golf link and Manyata Embassy Business Park in Bangalore and Embassy Tech Zone in Pune.
“Blackstone and Embassy Property Developments signed the transaction earlier this month. The deal was followed by the October 4 order of the Competition Commission of India, which gave clearance for the transaction,” said the person, who did not wish to be named. “It is an equity-level investment, where a holding company was floated with three commercial assets under it. However, the deal finally cascaded down to the SPV level.”
Experts said the deal is in line with this year’s trend. “Given the uncertainties in political and economic environment, investors are risk-averse and are investing in pre-leased commercial assets. Around 70% of the transaction closed this year are in pre-leased assets,” says Rajeev Bairathi, director-investment advisory at DTZ India.
As per the transaction, Blackstone will get compulsorily convertible debentures of Pune Dynasty Projects (PDP), which is currently into the development of the non-SEZ part of Embassy TechZone in Pune.
Once converted, Blackstone will hold 50% stake in the SPV. Additionally, Embassy, which owns 51% stake in PDP, will acquire 49% from Alta Vista, a Mauritius-based financial institution, making it a subsidiary of Embassy Property Developments (EPD).
“Post this acquisition, EPD will transfer its shareholding of 35.77%, 51.01% and 48.75% in the three SPVs in Pune and Bangalore that are developing business parks along with some other assets in the form of advance paid for the purchase of land and for acquiring joint development rights to PDP.
Herein after, all the three SPVs will become the investee company,” said a CCI order. Embassy Golf link is a 5-million-sqft, or 65-acre, business park while Manyata Embassy Business Park is a 100-acre integrated mixed-use development business park, which has a developable area of 18.29 million sq ft.
Embassy TechZone in Pune is spread over 70 acre with 52 acre designated for a special economic zone. Some of Embassy’s big tenants at its commercial properties in Bangalore and Pune include IBM, Capgemini, Mercedes Benz, Atos Origin and Accenture. “Blackstone and Embassy will jointly control and manage the entity in which the fund has invested.

The deal has very complicated structure with multiple cross-holdings. Embassy will be responsible for completion of the project,” the person said.
The Bangalore-based builder, which has delayed its Rs 2,400-crore IPO, has been on a fundraising spree. Embassy has received Rs 135-crore funding in an SPV from Blackstone to develop residential-cum-retail on the 14-acre land parcel in Hebbal.
The fund also has an exposure of Rs 540 crore in Manyata Embassy Business Park, the country’s largest operational tech SEZ, which it had bought from HDFC Property Ventures and the land developer.
Embassy has developed nearly 25 million sq ft with a high degree of focus on business parks, whose valuation is pegged at Rs 8,000-10,000 crore.
The company is also increasing its presence in the residential segment and has eight residential projects totaling 10.56 million sq ft under construction. It has a total debt of Rs 1,200 crore, of which 85% is linked to rentals. The company has a total land bank of 1,300 acre in Bangalore.

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