Bengaluru-based RMZ Corp said on Wednesday it was acquiring Equinox Business Park in Mumbai at a price of Rs 2,400 crore from the Ruias of the Essar Group. The property, spread across 1.25 million square feet, is located near Mumbai’s alternative business district, Bandra-Kurla Complex. The deal is among the largest ever in the real estate space but at a cost of Rs 19,000 per sq ft, isn’t expensive compared with capital values in neighbouring BKC, one of the most tony of business districts in the country.
As Rajeev Bairathi, head of capital capital markets at Knight Frank India, points out, while Kurla and BKC may be within a stone’s throw of each other, the comparison is one of chalk and cheese. “An institutional investor is looking to make a return so the price he pays cannot be compared to that paid paid by an occupier,” Bairathi said, explaining the difference between the price of Rs 34,000 per sq ft paid by Abbott for space in Godrej BKC and the transaction value of Equinox Business Park.
Rentals at Equinox are estimated to be in the vicinity of Rs 150 per sq ft per month, while rentals in BKC range between Rs 250 and 300 per sq ft per month. The business park houses tenants like Nissan Motor, Acropolis, Crompton Greaves, Gilbarco Aegis, Lafarge and the offices of Essar.
RMZ ‘s investment comes via the joint venture with Qatar’s sovereign wealth fund Qatar Investment Authority (QIA) formed three years ago. QIA had invested Rs 1,800 crore in the JV in 2013. The deal is the latest in a series of transactions that RMZ has done aimed at creating a portfolio of rent-yielding commercial assets. In December, the company bought an 800,000 sq ft IT Park in Gurgaon from Delhi-based developer BPTP for $130 million.
RMZ holds 20 million sq ft of core assets under management and plans to achieve 80 million sq ft in the next five years anchored by QIA. Its joint venture with QIA is among the list of JVs that is expected to do a REIT listing as and when the regulations come through. Commenting on the transaction, RMZ corporate vice-chairman Manoj Menda said, “We are confident that with this acquisition we will extend our core businesses into the growing markets with a world-class development opportunity in the heart of one of Mumbai’s major regeneration zones.”
Arshdeep Sethi, managing director (investment & alliances), RMZ, said demand for office space had stayed consistent over the years unlike that in the residential market. “Real estate players are also skewed towards select cities as far as office space buying is concerned. The goal is to become the No. 1 player in the segment shortly,” Sethi said. Essar Group promoter Anshuman Ruia said, “This is in line with the present objective and focus of Essar to monetise non-core assets and deleverage the balance sheet.”