 "blackstone, embassy office parks REIT")
US-based private equity fund manager Blackstone has refinanced lease rental discounting (LRD) loans worth Rs 2,500 crore with State Bank of India (SBI), said a source in the know.
It will be one of the largest such LRD refinancing by a bank in commercial properties in recent years, said sources. “The refinancing was done to avail of better interest rates,” said sources.
The refinancing was carried out for LRDs of properties, including One Indiabulls Centre and Indiabulls Finance Centre, which were bought from Indiabulls Real Estate and also the One BKC property bought by Blackstone last year.
Though the earlier rates for the LRDs stood at around 8.15 per cent, after refinancing, Blackstone got a rate of 7.5 per cent, added sources.
Blackstone did not comment on the matter. A senior official in SBI said these are marginal cost of funds-based lending rate (MCLR)-linked rates. “MCLR for one year is 7 per cent now. With tenure and risk premium addition, effective rates are in the range of 8.5-9.25 per cent. SBI is active in the Mumbai and Bengaluru markets for properties with prominent tenants with almost full occupancy.”
LRD refinancing picked up in recent months as rates started declining. LRD rates have fallen from 11.8 per cent in the second quarter (Q2) of last calendar year to 8.5 per cent in Q2 of this calendar year.
Earlier this year, Tata Realty and Infrastructure carried out refinancing for its Rs 400 crore worth of LRD loans. The company did not offer any comments.
Logistics player IndoSpace did a similar deal with a foreign bank, said sources. An email sent to the company did not elicit any response.
Rajesh Agarwal, chief executive officer and managing director at Shapoorji Pallonji Investment Advisors, said: “All A-grade commercial real estate owners are in the process of refinancing/reaching their lease rental discounting structures to take advantage of the current softness in the lending markets. Bankers are also warming up to the idea, as this offers one of the few avenues of cash flow-based-financing backed up by the strong underlying credit of ‘AAA’ corporates.”
Agarwal said it was more evident in the commercial and logistics sector where the rental calendar has not been affected negatively due to the current Covid-19 pandemic. This signed-in interest rate is expected to last for the next three to four years.
Vishal Srivastava, president-corporate finance, of Anarock Capital, said that in the aftermath of Covid-19, while banks are flush with liquidity, the avenues to deploy capital have been significantly constrained. “All the existing business and cash-flow models are being questioned, and the risk perception among banks is ever-changing,” he said.
In such a scenario, said Srivastava, LRD seems a relatively safe harbour for banks, and clearly public sector banks are leading the race in incremental LRD transactions. Also, the robust performance of two real estate investment trusts (REITs) by Embassy and Kilroy Realty Corporation has increased the maturity of the market, he added.
Blackstone owns 60 million square (sq.) feet (ft) in commercial properties, with partners in India following its setting up and listing of REITs in joint ventures with both Embassy and Raheja.
Embassy Office Parks raised Rs 4,750 crore through the public issue of its REIT last year, while the initial public offering of Raheja-Blackstone’s Mindspace Business Parks REIT was subscribed 13x in July.
Blackstone is also in talks with Bengaluru-based Prestige for the purchase of assets worth Rs 12,745 crore from the latter. Blackstone plans to acquire 20 million sq. ft of commercial assets from Prestige, according to reports.
