GIC invests $1.4bn to seal India’s largest RE deal

The Singaporean state fund has agreed to acquire a one-third stake in the rental property unit of Indian developer DLF.  

Singaporean sovereign wealth fund GIC has taken one of its largest bets on India by investing INR 89 billion ($1.39 billion; €1.17 billion) for a 33.34 percent stake in the rental property unit of DLF.

Indian developer DLF has agreed to sell a 40 percent stake in DLF Cyber City Developers Ltd (DCCDL) for INR 119 billion, according to an announcement made on the Bombay Stock Exchange. Of this, GIC has acquired a one-third stake by entering into a strategic partnership with DLF to develop the rental assets portfolio. Meanwhile the remaining stake would be bought back by DCCDL for INR 30 billion. A substantial portion of the transaction proceeds are to be invested back in the company.

“The portfolio comprises high-quality, income-generating assets which are located across India’s top-tier cities. In addition, there is significant development potential within the portfolio,” commented Lee Kok Sun, chief investment officer for GIC Real Estate.
The portfolio has a pipeline of approximately 2.5 million square feet with further development potential of another 19 million square feet.

This is GIC’s second partnership with DLF. In September 2015 the state fund invested INR 19.9 billion in partnership with DLF Home Developers to develop two residential projects in the capital city of Delhi.

The expansion into India – an active investment market for GIC – comes at a time when the Singaporean investor is looking to beef up its overall allocation to the asset class. According to PERE’s research, GIC, which currently has seven percent of its portfolio allocated to real estate, plans to eventually increase it to between 9 percent and 13 percent in the long-term.

For DLF, the transaction moves the developer’s enterprise value to INR 356 billion, which translates into equity value of around INR 302 billion. The sales process was first reportedly initiated three years ago in order to raise capital to meet DLF’s mounting debts which had racked up largely due to sluggish sales in the residential sector. According to a report in LiveMint, the developer’s consolidated net debt touched INR 250 billion of March this year, up from INR 222.02 billion in the financial year ending 2016.