Canada’s Brookfield Asset Management has agreed to buy 4.5 million square feet of prime commercial real estate in Powai from Hiranandani Group for $1 billion or Rs.6,700 crore, according to a top official of the Indian group.
“Ït may take four to five months for the deal to be concluded,” the official said on condition of anonymity. “The delay is caused because the Powai assets will have to be de-merged into a new entity before selling it.”
The deal is one of the largest such in the country’s real estate space and it signifies a rising appetite among global investors to invest in India’s commercial real estate. There was speculation since June about two contenders for the deal — the Canadian firm and GIC, the Singapore government's sovereign wealth fund. GIC is reported to have withdrawn from the race.
Two brothersThe Powai assets of the Hiranandani Group are housed under partnership between brothers Niranjan and Surendra Hiranandani.
“This is just the beginning,” Shobhit Agarwal, MD Capital Markets & International Director, JLL India told The Hindu. “ The deal size will increase with time and more foreign money will flow in as earlier we used to sell land parcels and now we are selling ready commercial assets.
“People are talking about big projects. Hiranandani deal may be the largest in Mumbai in commercial space,” Mr. Agarwal said.
Hiranandani's Powai offices are fully leased with big corporate clients such as Tata Consultancy Services, Nomura Group and Deloitte Consulting India among others.
“We are currently only corporatising our assets (from partnership firms) to consolidate our entire Powai holdings into a single corporate entity,” said a Hiranandani spokesperson. “This will allow us to raise capital in various ways especially a Commercial Mortgage Backed Securities option or a REIT which is not available to partnerships. Macquarie has been mandated to come on board to evaluate options at hand,” she said.
Industry observers believe that the restructuring was planned to either list the assets via a real estate investment trust (REIT) or to sell the stake to an interested partner.
“With regards to Thane, in light of the commercial transaction with TCS we were approached by a lot of investors but the company is not envisioning any transaction on that front,” the spokesperson added.
Foreign investorsSovereign funds, pension funds and large public institutions have been entering the Indian real estate market through acquisitions anticipating relatively better economic growth and therefore returns.
Institutional investors including Blackstone Group, Singapore's GIC, Canada Pension Plan Investment Board (CPPIB), Goldman Sachs and Qatar Investment Authority have been investing in Indian realty assets for the last few years.
As per an estimate by Knight Frank about $2.3 billion, or about Rs.15,000 crore was invested in the sector by foreign private equity firms in 2015 alone.
