Blackstone Explores $1.5-2 Billion Stake Sale in Indian Realty JV Projects Amid REIT Plans

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    In a strategic move aimed at capitalizing on India’s real estate market, global investment firm Blackstone is reportedly engaged in discussions with Singapore’s sovereign wealth fund GIC. The talks center around the potential sale of Blackstone’s 50 percent stake in select commercial assets within its joint ventures (JVs) with prominent Indian real estate developers – the Panchshil Group in Pune and the Salarpuria Sattva Group in Hyderabad. The deal encompasses a substantial leasable area of 26 million square feet and boasts an impressive enterprise value of $4 billion.

    Sources familiar with the negotiations have indicated that the envisaged transaction could range between $1.5-2 billion, contingent on ongoing valuation assessments and pricing discussions. Despite the deal’s preliminary status, insiders underscore the potential significance of this maneuver, hinting at a reshaping of Blackstone’s real estate portfolio.

    Among the assets in question, around 5 million square feet remain under construction, further adding to the allure of the deal. Within the Panchshil Group’s segment, the assets earmarked for potential divestment include the Eon Free Zone, Tech Park One, ICC Tech Park – which also features the upscale JW Marriott hotel with 415 keys, and the Pavilion Mall. The collaboration between Blackstone and the Panchshil Group was established in 2014. Meanwhile, the Salarpuria Sattva Group’s projects forming part of the deal in Hyderabad include Knowledge City, Knowledge Capital, and Knowledge Park. The Blackstone-Salarpuria joint venture has been operational since 2017.

    Importantly, it is emphasized that Blackstone’s intention is not to exit these joint ventures entirely, but rather to divest its stake in select projects. While GIC has emerged as the frontrunner in these negotiations, indications suggest that other potential suitors are also eyeing these valuable real estate assets.

    Blackstone’s original plan had been to amalgamate all its commercial properties under these JVs, along with its independent office portfolio under Nucleus Office Parks, to establish Asia’s largest real estate investment trust (REIT) for eventual listing. However, a revised strategy has seen Blackstone focus on optimizing the monetization of specific real estate holdings in the Indian market.

    A reliable source reveals that Blackstone still intends to pursue the creation of a REIT featuring its office portfolio. Nevertheless, this plan has been refined to involve a more streamlined portfolio size, indicative of the company’s adaptability to changing market dynamics.

    With distributable earnings as a key performance metric, Blackstone aims to expedite the monetization of its real estate assets. Balancing the timing of asset sales against the long-term potential for rental income and REIT listing value remains a pivotal consideration for the investment giant.

    The impact of a slowdown in the United States and Europe – traditionally major sources of high-grade office occupiers in India – has reverberated through the office absorption figures. According to data from Vestian, office absorption in India during the first half of 2023 witnessed a 5 percent year-on-year decline, amounting to 25.8 million square feet. The trend persisted into the June quarter with a 6 percent contraction, with major cities like Bengaluru, Mumbai, and Kolkata making significant contributions to this decline.

    Blackstone’s deliberations over the potential sale of its stake in key Indian realty JV projects underscore a dynamic strategy shift, seeking to leverage prevailing market conditions. While these negotiations are ongoing, the investment firm continues to navigate an evolving landscape, strategically positioning itself for both short-term gains and long-term REIT-based value.

    Also read: ‘Picture abhi baki hai’, says ‘bullish’ Blackstone CEO on India’s growth

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