RMZ Developers closing in on Rs 700 crore milestone deal

RMZ has acquired and developed over 13 mn square feet over 7 years and now manages property of over $3 bn in real estate value across India

RMZ Developers, one of the top three office-space developers in Bangalore, is closing in on a milestone transaction which will see the developer selling close to a one million square feet of fully fitted out office space to a single client for as much as close to Rs 700 crore. This transaction will mark the second major deal in Bangalore in the recent past, after Volvo India is also reported to be closing in on a transaction of similar magnitude with Bangalore-based Bagmane Group.

Two independent senior investment bankers specialising in the real estate space confirmed that RMZ Developers is working on sewing this deal. RMZ Developers recently signed a significant leasing transaction with Honeywell Technologies to lease one million square feet at Rs 47 per square feet on a yearly basis taking the total rental close to Rs 53 crore as Honeywell seeks to consolidate its different office locations in Bangalore. Bankers indicate that this lease transaction may be converted to the sell deal instead. RMZ and Honeywell could not be reached to ascertain if the lease may now be turning into a sell transaction.

According real estate advisory firm Cushman & Wakefield, office markets in India noted a rise in relocations and consolidations of companies to suburban or cost efficient locations during the first half of the year (Jan - June 2013). The total relocations across top eight cities in H1 2013 was noted at 5.46 million square feet which was 2.5 times higher compared to the same period last year and is one third of the total leasing activity. During H1 2013, Bengaluru recorded the highest proportion of relocations during HI 2013 with a substantial increase of more than 3 times when compared to same period last year.

Companies relocated from CBDôOff-CBD locations such as M.G. Road, Millers Road, Vittal Mallya Road and Residency Road to peripheral regions such as the Outer Ring Road. ITTeS and consulting companies being major contributors and the average relocation deal size was of approximately 100,000 sf.

This aspect of global majors starting to buy office space comes in the wake of the Indian Rupee depreciating and with global companies sitting on good amount of dollars which cannot easily be repatriated; they are looking to deploy resources in India to buy realty assets instead of leasing. It is understood that the US-based MNC, which is negotiating with RMZ to buy close to one million square feet of office space has around $210 million cash in India.

RMZ Developers, which trails Bangalore-based Embassy Group in terms of rentals in Bangalore-office space has an annual inflow of around Rs 350 crore, while Embassy is leading the pack at around Rs 500 crore.

RMZ had earlier raised a Rs 500 crore from Baring Private Equity to buy 6-million square feet of office space from Adarsh Developers in Bangalore at the SPV level, while it raised a commitment of $300 million at the enterprise level from Qatar Investment Authority.

In the past 7 years, RMZ has acquired and developed over 13 million square feet and today manages a property portfolio in excess of $3 billion in real estate value across India. As part of its aggressive foray into retail, homes, and mixed use projects RMZ has lined up projects across 64 Million sq. ft of development over the next five years.