How the DLF deal tilted towards GIC

GIC and Blackstone were neck-and-neck for acquiring DLF promoters' 40% stake in their rental arm

Singaporean sovereign fund GIC and US-based private equity giant Blackstone were neck-and-neck for acquiring DLF promoters’ 40% stake in their rental arm DLF Cybercity Developers (DCCDL). The realty major on Wednesday said it has entered into a exclusive agreement with GIC to sell the stake. DLF, however, did not announce the value of the deal, which is expected to be to the tune of Rs 12,000 crore.

Bid amount not withstanding, several factors tilted the scale in favour of GIC, say a top company executive and analysts. 

“GIC has the experience of having Reits (real estate investment trusts) in Singapore,” said DLF chief executive Rajeev Talwar, hinting that having GIC as a partner will help the company when it floats a Reit in the country or Singapore in the future. DLF has already said it has plans to float a Reit in the near future.

“Both of them said the entire 40% should be sold and not in tranches. We had to decide one investor,” he said.

Talwar agreed the fact that GIC being a sovereign fund and has perpetual capital also helped the matter in its favour. In comparison, American private equity giant Blackstone has fixed-tenure funds.

A private equity (PE) fund manager, who did not want to be quoted, said the fact that the Government of Singapore is already a investor in the company must have also helped the Singaporean investor clinch the deal.

Government of Singapore owns 3.8% in DLF.

A e-mail sent to GIC in Singapore did not elicit any response.

According to the PE executive, since Blackstone recently bought stake in K Raheja Corp rental arm, and it also has joint ventures with Bengaluru-based Embassy and Pune-based Panchshil, it could have conflict of interest as DLF competes with these players in some of the markets.

“More than just the headline valuation number, the way the deal is structured and rights of the investors play a key role in cementing a partnership and then eventually concluding a transaction,” said Rubi Area, vice-chairperson at fund manager Milestone Capital.

However, Arya also highlighted both Blackstone and GIC have relationship with DLF as both have joint ventures with it.

In 2015, GIC signed a joint venture with DLF to invest in two residential projects of the latter. DLF also has a joint venture with Blackstone for residential projects. Blackstone acquired the stakes in these projects through acquisition of BoA Merril Lynch’s Asia real estate assets. Both realigned their shareholding last year.

Expanding GIC portfolio

• The deal with DLF is also expected to help GIC to increase its portfolio significantly. Currently, it has portfolio of seven million sq ft of offices. With DLF deal, it will go upto 34 million sq ft. 

• Two years ago, it bought listed company  Nirlon which had Nirlon IT Park in Mumbai with an area of five million sq ft.

• It also has a JV with US based Tishman Speyer which has asset of about two million sq ft.

• However, Blackstone has double the size of GIC portfolio at 70 million sq ft.