Godrej Fund Management mulls launching REIT or core fund

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January 19, 2021 2:45 AM

The fund will be focusing on investments in office projects in Mumbai, NCR, Bengaluru and Pune. This is the third India focused office venture and fifth overall, sponsored by GFM.

Bolaraia said the fund raising environment is not easy, and is an uphill task, even though GFM has been able to raise the first round of the fund and is seeing good interest for the next $250 million as well.Bolaraia said the fund raising environment is not easy, and is an uphill task, even though GFM has been able to raise the first round of the fund and is seeing good interest for the next $250 million as well.

Godrej Fund Management (GFM) is working on a structure which could be a publicly traded instrument like REIT (Real Estate Investment Trust) or a private structure like a core fund to hold properties that it is planning to build and operate over the next two to three years through the fund.

The real estate private equity arm of the Godrej Group is currently in the early stages of finalising the structure and expects to close it within the time the properties it is planning, are up and ready.

Karan Bolaria, managing director & CEO, Godrej Fund Management, told FE, “Our objective is not to sell these properties but to be able to hold and manage them for the long term and continue to operate once they are done. Over the next 24 months, we will be planning the structure to hold these”.

GFM on Monday announced the first closure of $250 million of its new $500 million office development platform, GBTC II, in partnership with Netherlands-based APG Asset Management, the cornerstone investor in the platform.

Under this programme, GFM will have the ability to develop Grade-A office assets that will be valued in excess of Rs 11,000 crore on completion and the total value of office assets, including those from previous funds will take the portfolio value on completion to over Rs 22,000 crore. GFM has fully invested the previously raised capital under GBTC I and Godrej Office Fund I.

The fund will be making equity investments and will be entering at the land stage to have control over planning and building of the product. While most of the development will be done by Godrej, the fund is also open to partnerships with other developers. “We are open to partnerships to build a particular kind of product but it will be under our strict supervision. It will very much be Godrej planned and built products,” Bolaria said.

The fund will be focusing on investments in office projects in Mumbai, NCR, Bengaluru and Pune. This is the third India focused office venture and fifth overall, sponsored by GFM.

Also, the focus will be frontline standalone office properties and not office or IT parks. The platform currently has a strong investment pipeline and aims to deploy the newly raised capital by December 2021. While Bolaria refused to share return expectations from the fund, he said global investors are looking at making returns north of 20% in the post-Covid environment.

Bolaraia said the fund raising environment is not easy, and is an uphill task, even though GFM has been able to raise the first round of the fund and is seeing good interest for the next $250 million as well.

“Investors will make decisions with great amount of caution in India. So capital raising is not at all easy,” he said.

Bolaria said the company expects to close the remaining $250 million within 12-15 months. “By 2022 our fund should be fully done and we are also targeting deployment of the capital quite rapidly which means that the first round announced today should go into deals within 2021 calendar year and the top-up, which is the next $250 million, should also get deployed latest by October 2022,” he said.

Commenting on the timing of an office asset focused fund, when the segment has been most impacted due to Covid-19 and work-from-home culture, Bolaria said that it will all reverse. “We strongly believe that as things come back to normal, people will want to come back to the office. Albeit new offices post Covid will be a different product. We think we are in a good position today to have capital available to us that we can deploy in good deals and plan to make our product future proof. How people will inhabit offices will be taken into consideration in our design. We are creating offices, which will be applicable to the future rather than having to retrofit our buildings,” he said.

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