GIC, Phoenix group start talks over Rs 800-crore office project deal

Singapore’s sovereign fund GIC is in talks with Hyderabad-based Phoenix group to buy a 1.2 million square feet office project in the city, said sources in the know.

The deal is taking place at a cap rate of 8.25 per cent and is expected to be around Rs 800 crore in value, said sources. Cap rate or capitalisation rate means net operating income divided by current market value of the asset.

Though a couple of such big commercial deals have happened or is happening in the property market, GIC’s will be the largest single property deal this year, if it concludes. 

RMZ–Brookfield’s and Prestige–Blackstone’s (which is in the works), are multiple property deals that are taking place, sources said.

GIC has done a pre-leased office deal with Phoenix wherein the property called Phoenix Aquila is already leased to a technology company Micron, which is yet to occupy the space.

“Micron is expected to occupy the space in phases and GIC money is also expected to come in phases,” said source.

A mail sent to GIC did not elicit any response while Gopikrishna Patibanda, chairman and managing director, Phoenix group, declined to comment on the subject.

Micron could not be reached for comment.

Despite Covid-19 and work-from-home issues, bulge bracket investors such as Brookfield and Blackstone have done mega deals in commercial properties in the country. 

Brookfield has bought 15 million sq ft of properties from RMZ for Rs 14,000 crore. Blackstone is in talks with Bengaluru-based Prestige to buy 20 million sq ft of property for Rs 12,745 crore. The deal is expected to close in a week or two, sources said.

Blackstone’s joint venture (JV) with K Raheja Corp also floated a REIT and listed it earlier this year.

Though GIC was a slow mover compared to the likes of Blackstone, it has actively bought properties in recent years. It bought promoter stake in DLF’s rental arm and also floated a JV with DLF for setting up residential properties.

GIC bought Nirlon, which owns an IT park in Mumbai and set up a JV with K Raheja Corp for logistics centres. Recently, it put Rs 1,125 crore in Mindspace Business REIT of Raheja Corp and Blackstone.

GIC is also looking to invest in a new fund of Warburg Pincus-backed ESR, a logistics developer.

Saurabh Shatdal, managing director, capital markets, Cushman Wakefield, said, “The larger monies are watching the Indian real estate market very closely. With international developers/funds closing land transactions in larger cities, these players are actively looking to invest in assets with minimal risks. Such transactions will have the least impact on cap rates even with the current market situation. This only reinstates the positive outlook for the Indian commercial real estate story.”