Tata, Shapoorji looking to build strong portfolio of commercial properties

Embassy-Blackstone JV is gearing up to float the country's first Reit and raise $1 bn

The Tata and Shapoorji Pallonji groups, two of the country’s oldest conglomerates, are looking at building a strong portfolio of commercial properties with their partners at a time when global fund managers like Blackstone and Brookfield have pumped billions of dollars into such properties.

Tata Realty and Infrastructure (TRIL), the real estate and infrastructure arm of the Tata group, has a portfolio of 19-20 million square feet (sq ft) of commercial projects, including IT parks and special economic zones, both developed and under construction. The company is eyeing doubling the portfolio size in the next four to five years, sources in the know said.

Ramanujan IT City in Chennai, TRIL IT4 in Mumbai, and the upcoming TRIL Centre in Gurugram are part of the company’s portfolio. Of the 20 million sq ft, TRIL is developing 11 million sq ft in Gurugram and New Mumbai with its joint venture (JV) partner, UK-based private equity firm Actis. TRIL is looking at new land parcels in Pune, Hyderabad, and Bengaluru, sources said.

TRIL had a JV with Standard Chartered Private Equity, which was later acquired by Actis as part of its buyout of StanC’s Asia real estate portfolio. “The JV has signed two to three term sheets and may sign agreements in two to three months,” a source said.

An email sent to TRIL did not elicit any response.

Shapoorji Pallonji, on the other hand, is looking to acquire projects with its partners — Germany’s Allianz and Abu Dhabi Investment Authority (ADIA), sources said.
 

Shapoorji-Allianz is in the final stages of buying 2.3 million sq ft Waverock property, owned by Singaporean fund GIC and US-based Tishman Speyer, in Hyderabad and 2 million sq ft SP Infocity in Pune, owned by Shapoorji Pallonji Real Estate.

Shapoorji-ADIA is also buying 800,000 sq ft commercial complex owned by the Adani  group in the BKC area of Mumbai and looking at more properties, sources said.
 

Shapoorji also has a five-year old partnership with Canada’s CPPIB, which has gone slow on buying assets. “But Shapoorji is an opportunistic buyer and does not follow a portfolio approach,” a source said.

Shapoorji Pallonji could not be contacted for comment.

Besides, Shapoorji Pallonji Real Estate has over 9 million sq ft of developed assets. It is building 1 million sq ft in SP Infocity, Pune, which has a total development potential of 6 million sq ft.

Its 2.7 million sq ft SP Infocity in Chennai is owned by its fund management arm alongwith its partner CPPIB. Both are currently selling the property. SP Real estate has built 200,000 sq ft in Mohali, 500,000 sq ft in Manesar, and 200,000 sq ft in Nagpur.

In contrast, Blackstone has built a portfolio of over 100 million sq ft with its partners. It formed joint ventures with the Embassy group for office properties in South and Panchshil Realty for properties in Western India. Blackstone also picked up a 15 per cent stake in K Raheja Corp.

Embassy-Blackstone JV is gearing up to float the country’s first Reit and raise $1 billion. In June, Blackstone raised about $9.4 billion for two new funds — the largest-ever fund dedicated to real estate investments in Asia as well as its first private equity fund for the region.

Shobhit Agarwal, managing director and CEO, ANAROCK Capital, said the country is likely to witness first real estate investment trust (Reit) listing by the end of 2018 or early 2019. So, during the past few years, global investors have been lapping up commercial assets to build a strong portfolio, he added.

“In sync with this trend, both Tata and Shapoorji are also building a strong portfolio of commercial assets through the organic and inorganic ways. Considering that there’s an incessant demand for good quality office spaces, this approach by highly established developers is well-timed. Their portfolios of commercial assets can potentially reap rich returns in the future,” Agarwal said.