L&T Realty, Larsen & Toubro’s real estate arm, and Singapore-listed CapitaLand India Trust Management, the trustee-manager of CapitaLand India Trust (CLINT), have entered into a non-binding term sheet for a commercial platform to develop close to 6 million square feet of prime office spaces across Bengaluru, Chennai and Mumbai in India, valued at $1 billion.
As part of the agreement, CLINT will acquire a full stake in all three properties upon completion. All the three properties are expected to be complete between 2024 and 2026. CLINT will acquire the ownership of these properties in a phased manner.
“Our expectation is that this will be close to about $1 billion but in a phased manner, as these are large projects and will take sometime to completion. L&T will be the developer and we will help in marketing and leasing the space and then we will eventually acquire from them. During the construction phase they will be investing to construct,” Sanjeev Dasgupta, chief executive officer CapitaLand India Trust, told FE.
CapitaLand India Trust (CLINT) was formerly known as Ascendas India Trust (a-iTrust).
Dasgupta said that the deal with L&T is not much different from the forward purchase deals that the company already does with the other developers. Also, there will be a revenue sharing between the two companies for a short period of time till CapitaLand buys the entire stake out. “As they build it and the phase is ready, some leasing will happen. So they will have some ownership and then we will eventually own 100% of all the assets,” he said.
The assets will all be developed as IT parks.
According to Dasgupta, the proposed commercial platform with L&T provides CLINT an opportunity to scale up its presence across three major cities in well-established micro-markets. “Furthermore, L&T’s strong track record in project development and CLINT’s extensive customer network and leasing capabilities will create synergies across the platform,” he said.
Depending on the completion of these developments, CLINT expects majority of the capital commitment for the projects to start from the second half of 2024.
Shrikant Joshi, CEO & managing director, L&T Realty said, “The Indian office leasing market continues to grow with demand for quality office space from international and domestic clients. The net absorption space for January-September 2022 period stood at a three-year high of 30.3 million square feet. We are delighted to have forged partnership with CLINT for premium office space in the three top metropolises of India.”
Both parties will make an announcement at a later date when definitive agreements are signed.
CLINT had committed Rs 7,300 crore across six investments in 2021. As on June 30, 2022, CLINT’s assets under management stand at 2.5 billion Singapore dollars in India. It is aiming to take it to 7-8 billion Singapore dollars in the next 4-5 years. In addition, the fund is betting serious money behind data centres with commitment of Rs 1,200 crore and more on the way as it scouts for land, while it expects its warehouse portfolio to touch 1 billion Singapore dollars in total assets by 2025-2026.
L&T Realty has presence in Mumbai, Navi Mumbai, Bengaluru, Chennai and NCR, with a portfolio of residential, commercial and retail developments. The company is building over 100 million sq ft of office spaces across the country.