Blackstone, Panchshil Realty eye Rs1,250 cr Mumbai office property

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Blackstone, Panchshil Realty eye Rs1,250 cr Mumbai office property

Blackstone will acquire the under-construction office building from Kohinoor Group in its third such deal this year

Blackstone has been rushing to become the largest landlord when it comes to Indian grade-A commercial office buildings. 

Global private equity fund Blackstone Group Lp is inching close to acquiring a commercial office property in central Mumbai—the third such deal since the start of this year.

Blackstone will acquire an under-construction office building from Mumbai-based Kohinoor CTNL Infrastructure Co. Pvt. Ltd (KCICPL) for nearly Rs.1,250 crore along with Pune-based Panchshil Realty, said three people familiar with the development. The building is located in central Mumbai’s Dadar area.

“The location is central and the project Kohinoor Square is about 60-65% complete and the new buyers will start leasing out at around Rs.150 per sq. ft,” said one of the people directly familiar with the development, who did not want to be named.

“The project is much delayed and the developer hasn’t been able to pre-lease the office space yet. Once the project is acquired, Panchshil will develop the rest of the project,” added the second person, who also did not want to be identified.

Blackstone’s spokesperson declined to comment. Kohinoor Group’s spokesperson was not available for comment.

According to a June rating paper issued by Icra Ltd, KCICPL was incorporated in 2005 as a special purpose vehicle promoted by the Kohinoor Group to undertake the development of commercial and retail projects in Dadar. Kohinoor Group holds 60% in the project. The IL&FS Group, through its real estate fund IIRF India Realty VII Ltd, owns 39%, while the IL&FS Trust Co. Ltd owns the rest.
An email sent to IL&FS Investment Managers on Tuesday remained unanswered.

For the year ended 31 March, 2014, KCICPL reported a net loss of Rs.136.18 crore on an operating income of Rs.717.93 crore, the Icra report added.

The project is coming up on a 4.8-acre plot of land which earlier housed the defunct Kohinoor Mill.

In 2005, Kohinoor Group, promoted by Shiv Sena leader Manohar Joshi and his son Unmesh Joshi, along with Matoshree Realtors Pvt Ltd, bought the land for Rs.421 crore. A weak real estate market coupled with delayed regulatory approvals led Matoshree Realtors to sell off its stake to Kohinoor Group in 2008.

Kohinoor Group then tweaked the project plan and decided to construct a single office tower and residential project as opposed to the earlier plan of constructing a shopping mall and office space.
“Currently, the project is expected to be completed by April 2016. Furthermore, the company has tied up the debt funding for the increased project cost. The rating is also constrained by high market risks, with sales for 44% of the total area yet to be tied up,” said the Icra report cited earlier.

Once the deal is completed, it will be Blackstone’s third office purchase this year. Two of these have been in Mumbai and have closed in partnership with Panchshil Realty.

In early 2014, the two had acquired Mumbai’s iconic Indian Express Towers for nearly Rs.900 crore. In May, they acquired the 247 Park Office project from Hindustan Construction Co. Ltd’s real estate arm and IL&FS Milestone Realty Advisors for Rs.1,060 crore.

Even though other private equity funds and pension funds have formed joint ventures to acquire commercial office assets in the country, no one has been able to catch up with Blackstone in its race to become the largest landlord when it comes to Indian grade-A commercial office buildings.

Following the buyout of the 247 Office Park project, the private equity firm has nearly 32 million sq. ft of office space across cities including Mumbai, Bengaluru, the national capital region and Pune.

“Acquisitions of grade-A office space will continue to be strong, as large investors look at a business model with a long-term investment perspective, stable yield and an eventual exit through a real estate investment trust (REIT) listing,” said Shashank Jain, partner, transaction services, PricewaterhouseCoopers India, a consultancy.

REITs typically invest in completed, yield-generating realty assets and distribute a major part of the earnings among investors. The income of these investment trusts mostly comes from the rents received from the properties.

According to CBRE’s India Office Market View, Mumbai saw a considerable amount of office space completion during the first half of 2015, with most of the new supply concentrated in the Bandra Kurla Complex, Andheri and Lower Parel.

- by Pooja Sarkar

Source :- LiveMint

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