Prestige Estates surges 7% amid report Blackstone may acquire group assets

Blackstone will acquire 100 per cent control of around 20 million square feet of commercial space, including 16 million sq ft of ready and completely leased assets, the report said

Shares of Prestige Estate Projects surged 6.7 per cent to Rs 240 apiece on the BSE on Monday amid reports that US private equity giant Blackstone Group is set to acquire Prestige Group’s rental income assets for more than $1.7 billion -- around Rs 12,745 crore -- in the largest real estate portfolio buyout in India.

At 10:02 am, the stock was quoting Rs 231 per share, up 3 per cent on the BSE, as against 311 points, or 0.83 per cent, rally in the benchmark S&P  BSE Sensex. 

"The transaction involves ready, income-producing and under-construction properties in key cities of south India, including Bengaluru, Chennai and Mysore... It will be Blackstone’s single largest realty investment in the country and will also eclipse the $1-billion raised through listing of India’s two real estate investment trusts (REITs) — Embassy and Mindspace Business Parks," said a report by The Economics Times.

Blackstone will acquire 100 per cent control of around 20 million square feet of commercial space, including 16 million sq ft of ready and completely leased assets. “The deal is somewhat similar to the DLF-GIC investment. Prestige is looking to deleverage its balance sheet with this transaction and prepare itself for the next phase of growth,” the report said, quoting unnamed sources. “Aided by its execution capability and funds, it is planning to build another commercial assets portfolio over the next five years," it added.

Prestige Group’s net debt was Rs 8,174 crore at end of March at a debt-equity ratio of 1.46. It posted rental revenue of Rs 1,050 crore through its annuity portfolio in FY20. Once the transaction is complete, the Bengaluru-based developer will go ahead with plans to build a commercial portfolio of a total 32 million sq ft in the next five years, the report said.

According to a Crisil report, demand and supply for residential space fell by 70-90 per cent and more than 80 per cent in 1QFY21 as prices declined by 3-5 per cent in the top six cities. The agency expects demand to fall by 50-60 per cent in FY21 as job insecurity will keep it in check. The deferment of completion of under-construction projects and muted new launches will prevent the build-up of excess inventory. Prices across affordable, mid and luxury segments could fall by 2-4 per cent, 7-10 per cent and 5-15 per cent respectively.

"Developers may face challenges in raising new capital. Large players with strong balance sheet are likely to do better at the expense of smaller players. Buyers will opt for branded developers. Market share of top-10 players, from Crisil's universe, is likely to rise from 12.8 per cent in FY19 to 20-22 per cent in FY21," it said in a report dated August 1.