Blackstone to buy $250-mn stake in Raheja rental arm

PE behemoth beats Warburg Pincus, Temasek for 15%

In a move that further strengthens its position in office properties, private equity giant Blackstone is set to buy a 15 per cent stake in the office holding company of K Raheja Corp, one of the largest developers of information technology parks in the country, said a source in the know. The deal is believed to be of around $250 million (Rs 1,700 crore), valuing the company at $1.6 billion.

Blackstone and Raheja had signed an in-principle agreement on the deal and giving final touches to it, said the source.

Blackstone, which is the biggest owner of office properties, has beaten Warburg Pincus and Singapore’s Temasek to bag the deal.

Raheja is the third-biggest office developer-owner, after DLF and Blackstone, and it has office properties of 20 million square feet in Mumbai, Navi Mumbai, Hyderabad and other cities. K Raheja Corp, promoted by C L Raheja, also owns department store chains Shoppers Stop and Inorbit Malls, among others.

An e-mail sent to K Raheja Corp did not elicit any response, while Blackstone declined to make a statement, saying it did not comment on speculation.

This deal is significant for two reasons. It will be a precursor to the $2-billion stake sale by the DLF promoters in its rental arm and is likely to expedite the deal, according to sources. Both Blackstone and Singapore’s GIC are in the fray to buy 40 per cent in DLF’s arm.

Second, it is the third such alliance for Blackstone in India for office properties. It has a joint venture with Bengaluru-based Embassy Group called Embassy Office Parks, which has signed a letter of intent for a real estate investment trust (REIT). It has also tied up with Pune-based Panchshil Group for buying office assets. The Panchshil-Blackstone combine is also preparing to form a REIT.

Normally, it buys individual stakes in office properties and has invested $3 billion in Indian office assets. It has bought office properties such as Express Towers and 247 Park in Mumbai, EON Free Zone in Pune, among others.

The stake sale could be a precursor before Raheja hit the market with its REIT, said the source, adding that having a marquee name would help the company while going for the REIT, the source said.

Raheja is expected to use the money to grow the business.

The company is investing Rs 2,000 crore to build six-million square feet office space after investing in land parcels in Navi Mumbai and Pune. K Raheja could also deploy part of the fund for inorganic growth in markets like Hyderabad and Chennai, reports said.

Last year, it bought a land parcel in Navi Mumbai from chemicals-maker Cabot Corporation at Rs 210 crore and is in talks with Standard Industries to buy a land parcel in Navi Mumbai at Rs 355 crore.

Global investors are betting big on office properties, as they are low on risks and offer fixed income. Since REITs are expected to take off soon, the instruments are also an exit option for them.

Late last year, Canadian investor Brookfield Asset Management bought 4.5-million square feet office portfolio of the Hiranandani Group in Powai at $1 billion.

Office space demand in the country grew nine per cent in 2016 to touch an all-time high of 43 million square feet, according to US property consultant CBRE.

BLACKSTONE

 K RAHEJA CORP

(i) Blackstone is the biggest owner
of office properties, with over 

30 million square feet of offices
(ii) Invested $3 billion in Indian

office assets

(iii) Has a JV with Bengaluru’s 

Embassy Group. Has an alliance 

with Pune-based Panchshil Group 

for buying office assets

(iv) Owns Express Towers and 247 Park in Mumbai, EON Free Zone in Pune

(i) Raheja is the third-biggest 

office developer; has office properties of 20 million square feet in Mumbai, 

Navi Mumbai and Hyderabad

(ii) K Raheja Corp, promoted by 

C L Raheja, also owns department store chains Shoppers Stop and Inorbit Malls

(iii) Owns Mindspace in Mumbai, Mindspace in Navi Mumbai 

and Hyderabad