Shapoorji, Piramal look beyond CPPIB

They are not happy with slow pace of investments under the JVs with the pension-fund manager

Shapoorji Pallonji and the Ajay Piramal group, the Canada Pension Plan Investment Board’s (CPPIB’s) two joint-venture (JV) partners in India, have formed similar alliances or are in the process of forming them with new partners.

According to sources in the know, investments under the joint ventures have been slow and both Shapoorji and Piramal are looking for new partners.

The CPPIB is one of the largest pension-fund managers in the world. Shapoorji’s joint venture with the CPPIB was announced in November 2013. It was formed to invest in foreign direct investment-compliant office buildings in metros. 

The CPPIB owns 80% of the venture with an initial equity commitment of $200 million.

Since then, the JV acquired SP Infocity, an IT Park in Chennai, for $220 million or nearly Rs 1,400 crore, in June 2015. After that, it is yet to announce any new investments.

Now, Shapoorji, through its investment advisory arm SP Investment Advisors, is in the final leg of talks to form an investment platform with Germany’s Allianz group to invest in rental-yielding assets such as leased office buildings. The platform is worth $400 million and will invest in Shapoorji’s commercial assets initially and then buy into other developers’ properties, according to sources in the know. When contacted, a Shapoorji Pallonji spokesperson declined to comment on the matter. Emails sent to the CPPIB did not elicit any response.

Similarly, the Ajay Piramal group recently announced a joint venture with Ivanhoe Cambridge, part of Canada’s CDPQ, to provide equity to property developers.

Piramal has a $500-million joint venture with the CPPIB, which it entered into in February 2014 to provide debt to property developers. According to an investment banker, both CPPIB and Piramal could have looked at the equity part if they wanted, but Piramal went ahead with Ivanhoe. When contacted, a Piramal Fund Management spokesperson said: “Our JV with the CPPIB was a debt platform meant to target senior secured debt transactions based on certain parameters with a defined target return profile as well as security package.” 

The CPPIB has signed a $700-million deal to buy into Indospace, a logistics park owner promoted by Everstone Capital and Realterm.

The CPPIB’s partner firms and consultants gave different reasons for the slow progress of the joint ventures.

“They (CPPIB) came with very high yield expectations but yields have fallen as many investors have entered the commercial properties, pushing up property prices,” said an executive of one of the CPPIB’s partner firms.

Another executive said the CPPIB took a lot of time to take decisions due to its stringent processes and checks.

“Global investors are interested in Indian rental assets and we get approached regularly. We cannot sit tight because one JV is moving slow,” the executive said.

He gave the instance of Blackstone, which formed JVs with the Embassy group of Bengaluru and Panchshil Realty of Pune for office assets and building a portfolio of 70 million square feet. It also bought a 15% stake in the rental arm of K Raheja Corp.

Similarly, Singapore’s GIC also built a commercial portfolio of 33 million square feet. It has signed an agreement to buy 40% in the DLF rental arm.