Blackstone completes biggest India RE investment

New York private equity real estate firm adds to its small property portfolio in the country with the purchase of a half-stake in a trio of office parks in Bangalore and Pune from developer Embassy Property Developments.

The Blackstone Group has purchased a half-stake in three office parks in Bangalore and Pune in its largest investment in Indian real estate to date.

The New York-based firm has invested approximately $200 million in Pune Dynasty Projects, a special purpose vehicle holding Embassy Golf Link and Manyata Business Parks in Bangalore as well as the Embassy Tech Zone in Pune.

The investment was made on behalf of its Blackstone Real Estate Partners VII fund, which attracted a world record $13.3 billion of equity from investors and closed earlier this month.

The vendor of the stakes in the vehicle was Bangalore-based developer Embassy Property Developments which will retain the other 50 percent in the vehicle.

The deal is believed to have been in the offing for some time. According to a news report reproduced on Embassy’s own website, Blackstone was previously negotiating for a 36 percent stake.

Details of the deal are yet to be announced however PERE understands that Blackstone acquired the properties at a mark-to-market capital rate of 15 percent and reflecting a price per square foot of $90.

The deal sees Blackstone inherit exposure to properties benefiting from a number of international tenants including IBM, Capgemini, Mercedes Benz, Atos Origin and Accenture. It also means the firm has joint ownership of more than 30 million square feet of development land of which 19 million square feet has already been developed.

When exiting from the investment it is thought the partners might seek to list it via a REIT on the Singapore stock exchange.

Blackstone has held an ambition to invest meaningfully in Indian real estate since setting up an office in Mumbai in 2007 when it hired managing director Tuhin Parikh from TCG Urban Infrastructure Holdings, a property company specialising in office development that was partly owned by New York REIT Vornado Realty Trust. Nonetheless, the firm stayed on the market sidelines for about four years and even today has only invested approximately $480 million of equity from its Blackstone Real Estate Partners series of global opportunity funds in total.

It inherited certain Indian assets and staff when it assumed control of Bank of America Merrill Lynch’s Asian Real Estate Opportunities Fund in 2010, but this acquisition will go some way to cementing its presence in the market.

In addition to the acquisition of the half stake in the Embassy portfolio being Blackstone’s largest real estate outlay in India, the deal was reported also to have been the largest direct investment in the country this year, beating Citigroup’s purchase of an office building in Mumbai earlier this year for $187 million, the Economic Times of India reported.

Blackstone declined to comment.