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Allianz joins hands with Shapoorji Pallonji to form $500 mn realty fund

12 October, 2017

German insurance firm Allianz Group has partnered with homegrown construction major Shapoorji Pallonji Group to create a platform for making investments in India’s commercial real estate market.

Christened as SPREF II, the fund is targeting to raise $500 million for equity investments.

The Singapore-domiciled and rupee-denominated fund is the second in the series of commercial real estate dedicated platforms of Shapoorji Pallonji Investment Advisors (SPIA), the real estate investment arm of Shapoorji Pallonji Group. Back in 2013, it had forged a similar platform with Canada Pension Plan Investment Board (CPPIB) with an initial target corpus of $200 million.

As part of the deal, Allianz will own 50% of the platform while the remaining will be held by institutional investors.

The deal forms part of Allianz’s strategy to allocate around 5% of its global real estate portfolio to the Asia Pacific region, it said in a statement.

Francois Trausch, global chief executive officer, Allianz Real Estate, said, “India is strategically important to the Allianz Group. In growth economies like China and India, real estate provides a scalable entry into the market for Allianz in terms of investment and asset management exposure.”

The platform would leverage structural trends to build a long-term, cash-flow producing office portfolio by acquiring a blend of develop-to-core, forward purchases, and stabilised or stabilising assets.

It will put capital to work in cities such as Mumbai, Bengaluru, Hyderabad, Pune, Chennai and Delhi-NCR.

Rushabh Desai, chief executive officer, Asia Pacific, Allianz Real Estate, said, “We are looking to deploy around 60% of our Asia-Pacific allocation to growth economies. The Indian economy has been consistently outperforming. Strong secular growth, stellar demographic trends and improving transparency are supporting stable real estate occupiers as well as investor demand.”

“We have partnered with a top local operator to take advantage of this favourable environment. Shapoorji Pallonji’s developer/operator model is integrated to oversee all aspects of deal sourcing, design as well as construction, project, asset and investment management,” Desai said.

Shapoor Mistry, chairman, Shapoorji Pallonji Group, said, “We view this partnership as the first step in a relationship which will focus on creating long-term value for the investors and will be supported by Shapoorji Pallonji Group’s experience in delivering and managing real estate assets across key markets in India.”

The deal marks Allianz’s first real estate transaction in India and was conducted by Allianz Real Estate, the $63.5 billion (€53 billion) real estate investment and asset manager of Allianz Group.

Khaitan & Co, Ernst & Young and Macquarie Capital Securities (India) Pvt. Ltd acted as advisors to Allianz while JLL, AZB & Partners and PwC were advisors to Shapoorji Pallonji Group.

The development comes at a time when commercial real estate has outdone other segments of the market. On the back of a strong momentum in leasing and thereby falling vacancy levels, a host of investors from domestic and globals domains has queued up to lap up the opportunity.

Domestic investor ASK Property Investments Advisors recently opened up its investment horizon for commercial real estate and invested in a mixed-use project of ATS.

Global giants such as Blakcstone, GIC and Brookfield continue to be bullish on Indian and are deploying capital through various channels.

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Allianz joins hands with Shapoorji Pallonji to form $500 mn realty fund

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