Blackstone looks to exit through multiple Reits

The PE major and its joint venture partners are planning Reits for office assets

Private equity giant Blackstone would look to exit its investments in office properties with multiple real estate investment trusts or Reits including the ones floated by itself, said an executive who works closely with the US-based investor.

Blackstone is the biggest owner of office properties with properties of over 70 million sq ft. It has invested over $3 billion in office properties and malls since 2006. It has invested similar amount in private equity also in the country.

But globally, a third of its assets are in real estate. It manages assets worth $367 billion of which $102 billion in real estate.

Recently it bought a 15 per cent stake in the rental arm of K Raheja Corp for about $250 million, valuing the arm at around $ 1.6 billion. Raheja owns 20 million sq ft of offices.

"The idea is that when Raheja comes out with a Reit one or two years from now, they can exit and make descent returns. Whatever valuation they have come in now, they can look for much superior valuation later," said the executive.

In a Reit, a sponsor floats a Reit, units of which are sold to investors like in case of a public issue of shares and later they are listed on Kthe exchanges.

"Fifteen per cent stake in Raheja is small but it will give them a strong foothold in a large player who is growing fast," he said.

It recently bought a office complex in Mumbai called First International Finance Centre in BKC area for Rs 850 crore.

According to the executive, Blackstone has the same intent in the ongoing deal talks between DLF and the former wherein DLF promoters are selling 40 per cent stake in their rental arm for about $ 2 billion. The rental arm owns 27 million sq ft of office properties.

Embassy Office Parks, the JV between Blackstone and Bengaluru-based Embassy Group, has already filed intent papers with capital markets regulator Sebi for floating a Reit. The JV was entered in 2012.

The JV has a portfolio of 35 million sq ft and is valued at $ 3 billion. It is looking to raise $ 600 million and looking to divest 20 to 25 per cent stake in the issue, Jitu Virvani, chairman of Embassy group told this newspaper last year.

Blackstone's other joint venture with Panchshil plans to file papers for a REIT in this year, said Atul Chordia, chairman at Panchshil Realty recently.

Panchshil has a portfolio of 11 million sq ft which is valued at over $1 billion, sources said.

The JV has properties such as iconic Express Towers in Mumbai, Eon Free Zone in Pune among others.

"It also owns some assets on its own and can come out with a Reit on its own," said the executive.

Blackstone also owns four malls and intends float a Reit in the future, sources said.

Spread out

According to the executive, by partnering with different top office developers, it is well diversifying it's portfolio.

"So far, it has had partnerships with players who are strong in different regions and enjoy leadership positions," he said.

For instance, Embassy is a top office developer in Bengaluru, which absorbs highest amount of office properties in the country. Panchshil is the biggest in Pune and Raheja is one of the biggest in Mumbai.

"By doing alliances with regionally strong players, it is participating in their growth story and spreading the risks also," he said.

Rubi Arya, vice chairperson of Milestone Capital says Blackstone bought right properties at right price.

"Blackstone enjoys first mover advantage and bought marquee assets at attractive valuations. Now, deals are fully priced. Since many funds are chasing a few assets, whoever buys it, have to pay top dollar," Arya said.

Blackstone's realty play

* Blackstone is the biggest owner of office properties with properties of over 70 million sq ft.

* It has invested over $3 billion in office properties and malls since 2006.

* Globally, a third of its assets are in real estate. It manages assets worth $367 billion of which $102 billion in real estate.

* Blackstone has the same intent in the ongoing deal talks between DLF and the former wherein DLF promoters are selling 40 per cent stake in their rental arm for about $2 billion.

* Embassy Office Parks, the JV between Blackstone and Bengaluru-based Embassy Group, has a portfolio of 35 million sq ft and is valued at $ 3 billion.

* Blackstone's other joint venture with Panchshil has a portfolio of 11 million sq ft which is valued at over $1 billion.