Embassy to ride on Indiabulls to foray into Mumbai, NCR realty markets

In the last one year, Bengaluru realty player Embassy group has been getting attention for market-leading moves, at a time when most of the sector is dealing with a downturn. They include the launch of a real estate investment trust (REIT) called the Embassy Office Parks REIT, which was rolled out in April with the backing of New York-based investment firm Blackstone group. 

Then came the recent announcement on acquiring Indiabulls Real Estate Division (IBRIL). Specifically, on Thursday, Embassy announced it would buy out promoter Sameer Gehlaut’s stake in his firm Indiabulls Real Estate that is expected to be worth ~2,700 crore with an equity valuation of around Rs 7,000 crore, according to public reports. 

Indiabulls owns marquee assets that include One Indiabulls Centre, and Indiabulls Finance Centre in Parel, Mumbai, and the upcoming Indiabulls Blu Estate and Club in Worli, Mumbai. 

Jitu Virwani, chairman and managing director of the Embassy group, was in his family business when differences led him to part ways with his brother and go solo in 1993. At that time, say real estate analysts, he struck the right chord with HDFC Bank, which became his preferred lender and helped him grow his business, brick by brick. 

The early business was largely centred around offices and business parks that included back offices and was spread around southern cities, including Hyderabad, Chennai, and Bengaluru, and Pune but not Mumbai. 

Over time, Virwani, who has been described by those who know him as “a relationship-driven entrepreneur who is a balanced mix of aggressive and conservative” pushed the limits of his business by investing in foreign markets as well. 

In 2011, Indija, a Serbian town 20 miles from Belgrade saw Embassy set up a 125-acres park there. Other foreign plays include Malaysia. 
 

Even as some reports indicated that Blackstone was involved in the Indiabulls deal, officials with the private equity firm declined comment but said it was not involved. Virwani also declined to comment, when contacted. 

Anuj Puri, chairman at Anarock Property Consultants, says that there’s no doubt that the tie up for the REIT with Blackstone becomes a game-changer but Embassy has also evolved over the years.

Now, the company has even built and owns three hotels — two Hiltons and the Four Seasons — in Bengaluru. 

“Beyond growth, this is also the first time a major player from Bengaluru will have entered Mumbai’s real estate scene in a big way,” says Puri. The footprint will also extend to Gurugram and NCR where Indiabulls has its flags. 

Those who have worked with Virwani says he’s “an old school operator” in that he’s financially disciplined, strong on execution and stuck to his core-competencies for a very long time even if they were not as exciting as prime real estate. 

In 2015, private equity player Warburg Pincus and Embassy got together on a 110-acre parcel of land in Haryana with a view to building an industrial and warehousing park. 

Virwani is not a maverick risk taker like some real estate promoters are but has been a stable player, says Gulam Zia, executive director with property management firm Knight Frank India. 

“He’s also partnered one of the best and benefited from the great timing when it came to foreign investors taking note of the REIT platform in India,” adds Zia. Other foreign PE investors such as GIC and Brookfield are also partnering real estate platforms and on the lookout for deals. 

Blackstone may see Embassy as an excellent vehicle for spreading its wings across cities in the future but for now the Indiabulls deal does more than that.

Sobha Developers managing director JC Sharma says that “such transactions validate that India’s real estate story is intact, and bodes well for the industry, overall.”