Shapoorji, Allianz tie up for $500-mn office fund

Mumbai-based conglomerate Shapoorji Pallonji has partnered with German insurer Allianz to set up a $500-million fund to invest in office properties in the country.

Allianz will contribute half of the corpus and the rest will be raised from other institutional investors. Shapoorji will raise funds, manage the assets and exit the investments. This marks Allianz’s first real estate transaction in India.

This is the third tie up by Shapoorji for office investments. In 2013, it signed a 80:20 joint venture (JV) with Canada’s pension fund manager CPPIB to invest in office assets, which has invested in an IT park in Chennai.

It has also tied up with Abu Dhabi’s sovereign fund, Abu Dhabi Investment Authority, to invest in commercial properties, but that is not a JV. The tie up is in race to buy a business park in Bandra Kurla Complex area in Mumbai, reports said.

This deal forms a part of Allianz’s strategy to allocate about five per cent of its global real estate portfolio to the Asia-Pacific region, the German group said in a release.

“With Allianz, we want to do controlled transactions wherein the majority stake and decision-making will be with us. This is to maintain the Grade-A status of the property in the long run,” said Rajesh Agarwal, chief executive at Shapoorji Pallonji Investment Advisors.

Agarwal said the fund can develop properties worth $1.5 billion as they can leverage on their equity investments.

The fund will invest in Mumbai, Bengaluru, Hyderabad, Pune, Chennai, and National Capital Region. 

Rushabh Desai, Asia-Pacific chief executive of Allianz Real Estate, said: “We are looking to deploy approximately 60 per cent of our Asia-Pacific allocation to growth economies. Strong secular growth, stellar demographic trends, and improving transparency are supporting stable real estate occupiers as well as investor demand, in particular the office sector which is ideal for long-term core investors like Allianz.”

Khaitan & Co, Ernst & Young, and Macquarie Capital Securities acted as advisors to Allianz. JLL, AZB, and PwC were advisors to Shapoorji Pallonji Group.

A number of global investors such as Blackstone, GIC, CPPIB, QIA have bet big on office properties in the country due to the steady income they get in form of rent and capital appreciation of assets.

Blackstone itself has invested over $3 billion in office assets and is said to be the largest owner of office assets with a portfolio of 70 million sq ft.

The country absorbed about 40 million sq ft of office spaces in 2016. Vacancy levels are falling steadily over the past years.

UNDER THE DEAL

• Allianz will contribute half of the corpus and the rest will be raised from other institutional investors
• Shapoorji will raise funds, manage the assets and exit the investments
• The fund can develop properties worth $1.5 billion as they can leverage on their equity investments
• It will invest in Mumbai, Bengaluru, Hyderabad, Pune, Chennai, and National Capital Region