Ascendas, one of the largest investors and developers of business spaces in Asia, plans to develop commercial properties totalling a space of around 10 million square feet in India over the next couple of years. Raghavendra Kamath talks to Jonathan Yap, chief executive officer (India Funds) of the Singapore-based firm, on the Group’s strategy and plans for the country. Edited excerpts:
Are you raising any India-specific funds now?
We are always in the market, seeking investments. Ascendas invests based on the balance sheet, and at the same time remains open to like-minded co-investors who wish to invest with us. Other than the listed Ascendas India Trust (a-iTrust), we run a private fund called AIDT (Ascendas India Development Trust). The market cap of a-iTrust is S$700 to 800 million (nearly Rs 2,960 crore) and the value of the asset under management is about S$1 billion (Rs 3,700 crore). AIDT has a committed equity of S$0.5 billion (Rs 1,850 crore)
Does it makes sense to invest in IT parks and commercial properties now when leasing activity is on the decline?
It depends what view one takes — short-term or long-term. Of course, there are short-term challenges. For example, the SEZ scheme, which was mooted in 2005, saw the tax benefits reduced substantially recently. This naturally changed the view of investors on investing in IT space in India.At the same time, India has a competitive labour force, which is more qualified than say 10 years ago. This help to meet the labour requirement of the IT and associated sector. Hence, investors would then have to weigh the short- and long-term considerations in deciding whether or not to invest in IT and commercial space in India. From Ascendas’ perspective, we remain positive in making such investment at the right commercial terms. We do, however, hope for more consistent policy-making, and the real estate industry also need to position themselves and operate with a long-term view.
What is the kind of impact you have seen in your business because of slowdown in US and Europe?
Till date, our portfolio occupancy remains strong. Ninety-eight per cent of our stabilised portfolio are occupied -- that is, only two per cent is vacant. Even during the crisis of 2008, the occupancy was around 98 per cent.We target and gear ourselves to serve a specific market, that is those who expect quality real estate solutions. More than 90 per cent of our clients are multi-national corporations. These companies have a global platform and choose India to conduct business in as a result of India’s competitive labour force.
What will be the impact if the same situation continues for the next couple of quarters?
Based on available information, we believe that the impact is manageable. We will remain focus in serving our customers well and providing solutions relevant to them.
How do you look at the valuations of IT parks and commercial properties now?
I think the asking prices of vendors are still high. However, we cannot generalise it because each asset and location is different. Whether an asking price is fair depends on the demand and supply situation in a particular market.
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Going forward, will there be any change in strategy in terms of ticket size of invest-ments, life span of funds and allocation and so on?
By and large, the main focus will not change. Private equity funds typically have fund lives of 5 to 8 years. Investment or fund sizes would depend on the availability of appropriately priced investment opportunities. If there are enough interesting opportunities in relation to that elsewhere, investors would be prepared to commit more capital to India.
Tell me about your two investment vehicles?
See, a-iTrust holds about 6.4 million sq ft of completed properties and land that could be add another 2.5 million sq ft of space, which is to be developed over time. AIDT currently holds land which has a development potential of more than 10 million sq ft. The way we approach development is that we will be guided by the market and build according to demand. We will avoid over-building and take along term perspective since property is a long-term investment.
What is the current perception of global investors towards investing in real estate sector of India?
India is an emerging market. Investors may find the governance standards generally not as high as what they are used to in more established markets. But, there will be more investment opportunities, which is what investors find interesting.
In addition, they recognised that India has a good long term investment story. Therefore, they try to access India investments though platforms as well governed as possible.