How some big-ticket office deals hit a roadblock because of market delays

Amit Goenka, MD at Nisus Finance, said yield expectations of investors had gone up, with the rise in loan and capitalisation

Some big-ticket office deals in the country are being deferred or moving at a slow pace due to market conditions or regulatory delays.

Canada-based Brookfield Asset Management has put off a plan to sell its office complexes in Gurugram and Kolkata. It wants a better price and also to see the performance of Blackstone Embassy’s real estate investment trust’s Initial Public Offer of equity.

“Their bankers approached big global investors in the market to buy large commercial properties but Brookfield was not happy with the offers. They want to wait,” said a source in the know.

Brookfield had appointed a leading US investment bank to sell the properties. Sources said it is expected to hit the market again in the next financial year. Brookfield declined to comment. The Gurugram property was a 3.6 million sq ft one in Sector 21; the Kolkata property is 3.1 mn sq ft. Brookfield’s commercial property portfolio is 25 mn sq ft.

Brookfield had shown interest in buying the 1.2-mn sq ft  ICICI Tower from ICICI Bank in Hyderabad's Gachibowli business district. ICICI Bank did not want to sell it, said a source. An e-mail to the bank did not get a response.

Brookfield had, however, bought the commercial portfolio of Hiranandani Brothers in Mumbai’s Powai area for Rs 6,700 crore, in the country’s largest office property deal. And, bought Equinox Business Park in Mumbai from Essar Group for Rs 2,400 crore

Separately, the Shapoorji Pallonji Allianz joint venture had emerged as the highest bidder for Waverock, a 2.5 mn sq ft office complex in Hyderabad, owned by Singaporean sovereign fund GIC and US-based Tishman Speyer, offering around Rs 2,000 crore in middle of last year. "The deal is yet to be signed. There are three big investors involved. It will take some time,” said sources. Shapoorji Pallonji's comments could not be had.
 

Shapoorji Pallonji Advisors earlier moved out of talks to buy out Adani Group’s 800,000 sq ft commercial property, Inspire, at the BKC area of Mumbai.

Blackstone, the US-based private equity fund manager, is in talks with Radius Developers of Mumbai to buy out the One BKC office complex in the BKC area and with Adani Group to buy Inspire in the same area. 

“The One BKC deal is expected to get closed by February-end. Blackstone’s deal with Adani is on and a few clearances are awaited from authorities,” said a source. When asked, the Adani Group declined to comment.

Amit Goenka, managing director at Mumbai-based fund manager Nisus Finance, said yield expectations of investors had gone up, with the rise in loan and capitalisation rates (the latter refers to potential return on realty investment). "Buyers are looking at cap rates of nine per cent; earlier, deals were happening at eight per cent," he said.