After US investors such as Blackstone and Goldman Sachs, Canadian investors — CPPIB, CDPQ’s arm Ivanhoe Cambridge and others — are courting developers based in southern India, according to sources in the know.
"The investors have approached RMZ, Prestige Estates, DivyaSree Developers and Bagmane group for some kind of joint platform as they believe they can benefit from stable income and the rental appreciation in the Bengaluru office market," a source said.
Bengaluru accounted for 34 per cent of the total 9.5 million square feet take up in the second quarter of 2017, according to a report by Colliers International. The central business district of Bengaluru saw rental increase of 17 per cent in 2017, the highest in the country.
Qatar Investment Authority-backed RMZ is in talks with Canadian pension fund manager CPPIB, said Thirumal Govindraj, managing director, management, at RMZ. "We are looking to raise Rs 2,400 crore over the next two to three years. We could raise this money from QIA and CPPIB," Govindraj said. He said the company prefers pension funds and sovereign funds, as they can give long-term, patient money.
"Various investors have approached us and we are in talks with them. But nothing has been finalised," said Bhaskar Raju, executive director at DivyaSree Developers. He said more than funds, the company was looking to learn best practices and new ideas from the global investors.
DivyaSree has about 16 million sq ft of office properties and is looking to float a REIT (real estate investment trust) once they cross 20 million sq ft.
Mails sent to Bagmane group, CPPIB and Ivanhoe Cambridge did not elicit any response.
Bagmane owns 13.5 million sq ft of office properties and another 12 million sq ft is in pipeline.
Prestige has segregated its business verticals and is looking to sell stake in its commercial property arm, which includes its office and mall properties.
According to Somy Thomas, managing director, valuations and advisory services, Cushman & Wakefield, there are very few developers with size and scalable business available for partnerships in Indian cities. "Bengaluru is the largest office market and only a handful of developers have good size and scalable business," Thomas said.
Shobhit Agarwal, managing director, capital markets, JLL, said that the Canadian investors are coming as treaties are condusive and both countries share good relations.
"US investors are coming to the domestic markets after (Donald) Trump became the US President. The risk-adjusted returns seem to be attractive for them in their home markets," he said.
Agarwal said both investors and developers were looking at eligible partners. "It is the investors who are courting developers than other way round. Investors are keen to invest but developers are saying that since they are getting many offers, they can wait and watch," Agarwal said.
Blackstone has a joint venture with Bengaluru’s Embassy Group that owns 20 million sq ft of office properties. It is also gearing up for floating the country’s first REIT.
Goldman Sachs has a joint platform with Nitish Estates to invest in commercial properties.
CPPIB recently entered into a $1.3-billion deal to buy into IndoSpace, the logistics company promoted by PE fund manager Everstone.
It also picked up a stake in the special purpose vehicle of Phoenix Mills, which will buy and develop new malls.
Ivanhoe Cambridge, the real estate arm of Canadian fund manager CDPQ, entered into a joint venture with Ajay Piramal group to provide equity capital to developers.