After buying one phase of Pune-based commercial real estate project Blue Ridge last year, Ascendas India Trust may be looking to buy out US-based private equity (PE) giant Blackstone and become the sole landlord, sources familiar with the development told FE. Last year, Ascendas had agreed to acquire the second phase of this project in a two-stage process. The deal was valued at approximately Rs 900 crore. Along with Ascendas, GIC, Brookfield and RMZ are believed to have also thrown their hats in the ring. In phase one of this IT Park & SEZ, now up for sale, Blackstone reportedly owns six buildings, which translates to 1. 4 million sqft that are fully leased out and commanding rentals anywhere between Rs 50 and Rs 60 per sqft. According to estimates sourced from a consulting firm, shortly after Blackstone acquired the project in late 2014, rents were Rs 45 per sqft. The deal is being negotiated with an expectation of a yield rate north of 7%, experts said. Assuming a capitalisation rate of 8%, the enterprise value of the phase can be estimated approximately between Rs 800 crore and Rs 1,200 crore, given a monthly rent of Rs 50-60 a sqft.
One sector expert pointed out that even if 7% is considered ambitious, Blackstone is expected to set a benchmark. The company had negotiated hard for the project even three years back when Blackstone had finally clinched the deal from IDFC Alternatives. Now that Blackstone is looking to sell its entire stake and exit the project, Ascendas is being said to be the frontrunner. Although it could not be verified, Blackstone is believed to have initially paid an yield or capitalisation rate estimated around 10%, according to people in the know, allowing IDFC to walk away with a 22% IRR.
However, IDFC exited the asset after holding it for one year. “About 15% to 18% in the current market over three years would be prudent,” said Shobhit Agarwal, managing director of capital markets at JLL India. Capitalisation or the yield rate is directly related to the value of the underlying property; the lower the yield, the higher the property value. An email sent to Ascendas for comments was unanswered. Blackstone officials also could not be reached for comments.
This project is not a part of Blackstone’s partnerships with either Embassy Developers or Panchshil Realty, and therefore does not comprise part of its REIT portfolio. “But before its impending REIT listing, it is not surprising that Blackstone wants to demonstrate a couple of profitable exits,” said Agarwal. Experts said funds typically prefer having total control of properties that they invest in because decision making as well as exit negotiations become easier. So, it makes strategic sense for Ascendas to negotiate the deal.