APG backs Godrej Fund Management’s debut Indian office strategy

The Dutch pension fund asset manager is the cornerstone investor in Godrej Fund Management’s build-to-core office investment platform.

Godrej Fund Management (GFM), the real estate fund management platform of the Mumbai-based conglomerate Godrej Group, has raised around $385 million in total from global institutional investors for its office investment strategy in India.

The move marks GFM’s foray into commercial real estate investing, which is being pursued through the launch of two different investment strategies.

PERE understands around $275 million has been raised for Godrej Build to Core – I (GBTC – I), a co-investment platform that will pursue development deals in the core office segment. The Dutch pension fund asset manager APG, which also has a residential joint venture partnership with GFM, is the cornerstone investor in the office platform. GFM has a 20 percent stake in the platform and is also looking to bring in one more institutional investor, according to one person familiar with the strategy.

GFM is said to have started the capital raising process for GBTC- 1 around one year ago, and has set a $450 million fundraising target.

Separately, the firm has also set up a blind-pool discretionary core-plus real estate fund, Godrej Office Fund – I (GOF-1). GFM began fundraising for the fund around eight months back and has so far held a $110 million first close towards a $150 million target. The fund will have acquisition capabilities of around $300 million, including leverage, according to Karan Bolaria, managing director and chief executive at Godrej Investment Advisers.

With the fund, the firm is targeting investments in smaller standalone office buildings in key commercial markets that have a repositioning potential. GFM is targeting returns of around 12 percent, PERE has learned.

When asked the reason behind launching two separate vehicles, Bolaria told PERE that some of the investors did not want to take development risk and for them GOF-I was better suited.

“They [investors] wanted to play the India core/core-plus India investment story. They also did not have time to get involved in the decision-making process and preferred to invest in a fund,” he added.

GFM’s decision to launch a blind-pool fund for investing in India comes at a time when domestic fund managers have been veering away from commingled vehicles towards more institutional joint venture partnerships and club deals, driven by what the global institutional investor community wants. Reflecting this shift in strategy, PERE data showed that out of 18 private equity real estate funds launched by domestic Indian managers since 2016, only three have had a final close to date.

According to Bolaria, this is one reason why the firm decided to limit the hard-cap of the fund only to $150 million, and use the fundraise to create a track record.

In March 2016 PERE reported on GFM being carved out as a separate fund management subsidiary within the Godrej platform. The first investment vehicle that was brought on to the GFM platform was a $275 million residential partnership with APG, the second residential-focused JV in India between the two firms.

Following its move into the commercial sector, the firm will now be looking at investment opportunities in retail, hotels and logistics.