Brookfield bridges gap with Blackstone in office property in India

Globally, US-based private equity giant Blackstone is much ahead of rival Brookfield Asset Management in terms of owning office properties.

In this country, however, Toronto-based Brookfield seems to be closing this gap. It has built a portfolio of a little over 24 million sq ft of office property here. New York-based Blackstone owns 78 mn sq ft here, mostly through its joint ventures; however, its share in JVs and own properties comes to 38 mn sq ft.

Globally, Blackstone owns 230 mn sq ft, as against Brookfield’s 131 mn sq ft. 

Even in terms of value of the assets under management, Blackstone overtook Brookfield as the world’s largest real estate investment manager last year. It had gross assets under management (AUM) of €143.2 billion ($177.6 billion) according to the annual ANREV/INREV/NCREIF fund manager survey. Brookfield manages €140.5 billion ($174.2 billion).

“I won’t be surprised if Brookfield overtakes Blackstone in terms of owing office properties in the country,” said Amit Goenka, managing director (MD), Nisus Finance Services.

The key difference between their strategies is that Brookfield has gone alone in buying properties; Blackstone has adopted a mixture of JVs and owning assets fully.

Brookfield bought the 1.25 mn sq ft Equinox Business Park in the BKC area of Mumbai early this year, 4.5 mn sq ft commercial properties of the Hiranandani brothers in the Powai area of Mumbai in 2016 and 17 mn sq ft of Unitech Corporate Parks in 2014. It is now in the final stage of buying ICICI Tower in Hyderabad, sources said.

“Both (owning assets fully and JVs) are equally good strategies and there is hardly anything to choose between the two,” said Shobhit Agarwal, the MD at ANB Capital Advisors.

Blackstone owns 23 mn sq ft in a 50:50 joint venture with the Bengaluru-based Embassy group. It owns 11 mn sq ft in an equal JV with Pune-based Panchshil Realty. It also owns 15 per cent in the rental arm of K Raheja Corp, which has 20 mn sq ft, beside owning properties on its own.

Goenka of Nisus Finance said Brookfield has also bought unbuilt properties. “They (Brookfield) are willing to take brownfield risks (on properties still being developed); Blackstone has not taken such risks.”

Owing to buying such under-development assets, Brookfield would take time in generating returns, Goenka said. While Blackstone has bought fully-built assets, which would generate returns faster.

Brookfield has done mostly big deals, he added. “In fact, most of their deals are not less than $500 million so far. Blackstone has also done smaller deals. Brookfield has a concentrated portfolio and chunky assets; Blackstone has a diversified portfolio,” he said.

Brookfield has assets which can be put in the form of a real estate investment trust; also, those with a micro market impact. “They have become a price-making entity. When you own assets like what they have in Powai, you can dictate prices in the market,” says Goenka.

An analyst, who did not want to be named, said Brookfield predominantly owned information technology parks, which have lower rents; commercial offices carry higher rents, he said.

Blackstone acquired two office properties in Mumbai — the Express Towers and Citibank’s old head office, with Panchshil Realty.