CPPIB floats joint venture with Bengaluru's RMZ to tap office properties

Canada pension fund manager plans to infuse Rs 2,500 cr into the venture

Canadian pension fund manager Canada Pension Plan Investment Board (CPPIB) has signed an equal joint venture with Bengaluru-based office property developer RMZ for development in Chennai and Hyderabad.
 
While CPPIB will invest Rs 2,500 crore in the joint venture, RMZ will bring in land for development, said Manoj Menda, corporate chairman at RMZ. The JV will develop 12 million square feet in total, he said. Value of the total developed properties would be around $1 billion, he added.
 
Last year, RMZ sold 12 million square feet of its portfolio to Canadian investor Brookfield for $2 billion. This representated 18 per cent of its portfolio. RMZ also sold its co-working firm Cowrks to Brookfield. Earlier, CPPIB tied up with Shapoorji Pallonji group to invest in income-yielding properties. It sold that asset in Chennai to Mapletree Investments. It also floated a venture with Piramal to offer debt to developers and formed a JV with Phoenix Mills to invest in malls. CPPIB has funds worth $475.7 billion and is one of the biggest fund managers in the world. RMZ is also looking to partner another global investor for office properties, said Menda.
 
He added that along with investor Mitsui Fudosan, CPPIB and the new partner (yet to be finalised), it is looking to develop another 55 million square feet in the country.
 
“Out of 55 million square feet, we will sell 10 million square feet to retire debt, and out of the remaining portfolio, 30 million square feet will be shifted to the family office,” he said. Fudosan came in as investor 18 months ago as a 50 per cent partner in some of RMZ’s projects.

 
“Each of the partners will bring in Rs 2,500 crore,” he said, adding that in each of the projects, one third will be construction debt, one third from CPPIB/Mitsui and the remaining will be put in by RMZ. RMZ is looking to invest $5 billion in Hyderabad to develop a property with its funds, along with CPPIB and a new partner, he said.
 
Family office plans
 
Menda said after the deal with Brookfield, RMZ has transferred income-yielding assets of 10 million square feet with an operating income of Rs 1,000 crore a year to the Menda Family Office.
 
It plans to scale that up to Rs 3,000 crore in the next three years. “As we complete office properties, we will shift them to the family office. We will take operating income from Rs 1,000 crore to Rs 3,000 crore,” he said. He added that the family office will invest Rs 1,000 crore in non-real estate areas such as private equity, industrial parks, and so on.
 
“We can also end up buying hotels so that we can diversify outside real estate,” he said.