Blackstone looks to buy more of under-construction office projects

Blackstone, the US-based private equity fund manager, is looking to buy more of under-construction office projects. It is preferring these projects to fully built and leased properties due to more of competition, falling yield and the like.

Blackstone has been buying office property in this country since 2011, having invested in a little over 100 million sq ft. About 60 per cent of this is in completed properties.

This strategy could change. “They are more interested in properties where is there is some development potential and leasing has not happened yet. There is more interest in rent-yielding properties from pension funds and sovereign funds, happy with low risk and fixed income properties,” said a person who is aware of Blackstone’s plans.

Blackstone did not offer comments on the subject.

Blackstone was an early entrant into office property and information technology (IT) parks. Later, it saw competition from the likes of GIC of Singapore, CPPIB of Canada and ADIA of Abu Dhabi in buying commercial property. This has raised valuations and reduced yields, say analysts. 

Yields in completed properties have fallen from 10-11 per cent earlier to eight to nine per cent. Those in property under construction are estimated at 12 to 20 per cent. Last year, Blackstone and Bengaluru-based Salarpuria Sattva tied up to develop two commercial projects in Hyderabad. 

Blackstone has put fully leased properties such as Express Towers and FIFC in Mumbai, and those in Pune and Gurugram (Gurgaon) in a real estate investment trust launched by Embassy Office Parks. It entered into a joint venture with the Embassy group recently. 

However, Blackstone’s global rival, Brookfield, is continuing with the buying of both fully developed and under-construction property, said sources. 

It had bought under-construction IT parks of Unitech Corporate Parks in the Delhi region and in Kolkata, as well as a fully developed Equinox Business Park in Mumbai.

BRANCHING OUT

• Blackstone invested in over 100 million square feet of office properties 
• Recently, its joint venture firm Embassy Office Parks came out with IPO for its realty trust
• Yields in completed properties fallen from 10-11% earlier to 8-9% now 
• Last year, Blackstone and Salarpuria Sattva tied up to develop two projects in Hyderabad
• Blackstone has put Express Towers, FIFC in Mumbai, those in Pune and Gurugram in REIT