Blackstone in the final leg of talks to buy out Embassy Industrial Parks

US-based private equity (PE) giant Blackstone is in the final leg of talks to buy out PE major Warburg Pincus and Bengaluru-based property developer Embassy from their warehousing joint venture (JV), known as Embassy Industrial Parks, said sources in the know.

Though the JV was looking to monetise the business at an enterprise value of Rs 1,700-1,900 crore in an earlier round of talks with investors last year, the deal could happen close to the price range, said sources.

But much has happened since then.

“The deal talks are at a fairly advanced stage and will be signed by March-end,” said the source.  

When contacted, Aditya Virwani, chief operating officer at Embassy, confirmed what the sources said, saying “we are talking to investors and looking to close it soon”, but without disclosing the amount they are looking to raise with the sell-out.

Emails sent to Blackstone and Warburg Pincus did not elicit a response.

Warburg Pincus has 70 per cent stake in the $250-million JV set up in 2015, with a $175-million commitment from Warburg, while Embassy has 30 per cent.

Though talks also took place separately with two other companies — Asia-focused logistics player ESR and GLP-backed IndoSpace — they did not materialise owing to valuation differences.

Embassy has a long-standing partnership with Blackstone through their JV Embassy Office Parks, which has floated and listed a real estate investment trust (REIT).

Embassy Industrial Parks is developing warehousing projects at Chakan in Pune, Sriperumbudur and Hosur in Tamil Nadu, in Farrukhnagar and Bilaspur in Delhi-National Capital Region, and in Kothur in Telangana.

The JV’s total portfolio is 15-16 million square (sq.) feet (ft), of which 4 million sq. ft is operational.

For Blackstone, warehousing seems to be new focus area after it entered office properties in 2011 and then malls subsequently. Blackstone floated two REITs with its partners, Embassy and K Raheja Corporation, and listed them.

It will be Blackstone’s second venture in warehousing after it floated a JV with Hiranandani Group.

In late 2019, Blackstone formed a JV with GreenBase, a Hiranandani Group firm, to develop warehousing and logistics parks, marking its entry into the Indian warehousing and logistics sector.
 

The equal JV planned to invest over Rs 2,500 crore to develop around 12 million sq. ft of industrial and warehousing assets across the country in three to four years.

So far, the JV has finished 2 million sq. ft of warehousing and a similar amount of space is under development.

Owing to the rapid growth in e-commerce and the introduction of goods and services tax, several companies entered the logistics space in the past five years.  While domestic companies, such as Embassy and Welspun, entered the space, PE funds, such as Warburg Pincus, also actively invested in it.

According to Colliers International, the sector has attracted interest from multiple large institutional investors, with investment inflows of Rs 27,800 crore ($3.7 billion) since 2017.

Between 2017 and the first half of 2020, the sector garnered a considerable 17 per cent share of the total PE investment.