Blackstone, a prominent player in the alternative asset management sector, is reportedly in discussions with Singapore’s sovereign wealth fund, GIC, to sell its 50 percent stake in select commercial assets developed in partnership with the Panchshil Group in Pune and the Salarpuria Sattva Group in Hyderabad. These potential transactions, if realized, could have a significant impact on India’s real estate landscape.
Projects and Valuation
The joint ventures under consideration involve expansive projects encompassing approximately 26 million square feet of leasable area. With an estimated enterprise value of $4 billion, the proposed deal is speculated to range between $1.5-2 billion, subject to ongoing negotiations and final pricing.
A substantial portion of the leasable area, around 5 million square feet, is currently under construction.
Projects Under Review
In the realm of the Panchshil Group’s projects, the prospective deal includes Eon Free Zone, Tech Park One, and ICC Tech Park, which encompasses the notable JW Marriott hotel with 415 keys and the Pavilion Mall. This collaborative venture was initiated in 2014.
Concurrently, the Hyderabad projects falling under the purview of the Salarpuria Group and Blackstone entail Knowledge City, Knowledge Capital, and Knowledge Park. The partnership for these projects was formed in 2017.
It’s important to note that the potential stake sale pertains to specific projects and does not imply a complete exit from the joint ventures. Blackstone retains involvement in numerous ongoing projects with both real estate groups.
Stakeholders’ Stances
While Blackstone declined to comment on these developments, GIC has yet to respond to queries directed via its website’s contact form.
Altered Portfolio Strategy and REIT Plans
Originally, Blackstone envisioned integrating all commercial properties from its joint ventures, along with its Nucleus Office Parks’ portfolio, to establish Asia’s most extensive real estate investment trust (REIT) and subsequently list it. However, strategic shifts have led to a renewed focus on the monetization of select real estate assets in India.
While Blackstone’s plans for a REIT remain intact, they now revolve around a reduced portfolio size. The rationale behind this adjustment stems from prioritizing distributable earnings and leveraging efficient asset monetization as a primary means of realizing value. The company seeks to strike a balance between extracting returns through asset sales and capitalizing on long-term potential via REIT listings.
Market Landscape
Blackstone’s strategic maneuvering is influenced by broader market dynamics. The slowdown in the US and Europe, which are significant sources of Grade A office occupiers in India, has had a noticeable impact on office absorption. According to Vestian, a workplace solutions firm, office absorption in India witnessed a year-on-year decline of 5 percent in the first half of 2023, amounting to 25.8 million square feet. The downward trend persisted in the June quarter, with a 6 percent decline. Key Indian cities such as Bengaluru, Mumbai, and Kolkata contributed substantially to this contraction in office absorption.
As Blackstone navigates these market conditions, its recalibrated strategies underscore its determination to optimize asset monetization while adapting to evolving market realities.
