Embassy Group plans to explore more opportunities in warehousing

Bengaluru-based property developer Embassy Group will again explore more opportunities in warehousing after closing a Rs 1,800-crore warehousing deal with US-based fund manager Blackstone.

Embassy is in the final stages of selling Embassy Industrial Parks — its warehousing business with private equity (PE) major Warburg Pincus — to Blackstone.

The foray will be made through its merged entity with Indiabulls Real Estate. Embassy Group is merging the assets of Indiabulls Real Estate with itself.

“There is no no-compete clause. We can look at warehousing after the deal,” said Aditya Virwani, chief operating officer at Embassy Group.

Embassy could tie up with a PE fund for the new venture, he said. “We got a good value in the deal with Blackstone. Warehousing has good potential and that’s why we want to come back,” added Virwani.

Embassy plans to use the funds from the deal as growth capital in its office and residential projects.

Embassy is also looking to grow its residential play after the merger with Indiabulls, he added.

 

It has also bought new land parcels in the past few months, he said. Embassy recently set up a $500-million investment platform with Canada’s Ivanhoé Cambridge Inc. to develop office properties in the country.

Banking on huge demand from e-commerce and retail, global investors have bet big on the warehousing segment in the country.

Last month, Singapore-listed Mapletree Logistics Trust bought two warehousing properties in Pune from a unit of Morgan Stanley Real Estate Investing and another entity for Rs 450 crore.

Recently, CDC Group of UK invested Rs 250 crore in TVS Logistics for a 35 per cent stake, valuing the company at Rs 700 crore. Singapore’s sovereign wealth fund GIC and logistics firm ESR also set up a $750-million joint venture for warehouses in the country.

According to global consultancy firm Savills, industrial and warehousing space absorption is expected to grow 83 per cent to 47.7 million square feet in 2021. This has been driven by robust growth in e-commerce and manufacturing sectors, as well as rising demand in tier I and tier II cities.

Third-party and e-commerce sectors continued to drive demand, accounting for 60 per cent of the total absorption in 2020, followed by manufacturing at 24 per cent. 

In 2020, the industrial and warehousing market witnessed investments in excess of $1 billion. 

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.