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Blackstone picking up stake in Indiabulls’ subsidiaries in big-ticket realty deal

26 March, 2018

Alternative investment firm Blackstone Group LP is buying 50% stake in two subsidiaries of listed developer Indiabulls Real Estate Ltd in one of the biggest private equity deals in Indian real estate.

The Mumbai-headquartered real estate firm said in a disclosure to the stock exchanges that it had divested 50% stake each in Indiabulls Properties Pvt. Ltd and Indiabulls Real Estate Company at an enterprise value of Rs 9,500 crore (around $1.46 billion).

In effect, it has shed stakes in Indiabulls Finance Centre and One Indiabulls Centre in Mumbai, two key commercial properties in the country’s financial capital.

The projects have a cumulative space of around 4.1 million sq. ft.

“Substantial part of sale proceeds would be utilized towards repayment of existing debts of the company and its subsidiaries, and for achieving sustainable long term growth and for further strengthening of their on-going businesses,” Indiabulls said in a stock market disclosure.

It added that the transaction is expected to be completed by March 31.

The deal between the US-headquartered private equity giant and Indiabulls had been in the pipeline for quite some time. The developer had set the ball rolling for a stake sale when it began work on restructuring its commercial and residential businesses.

In a separate notification on Sunday, Indiabulls said that it has entered into a definitive agreement to sell its commercial and residential projects in Chennai.

The developer will divest stakes in wholly-owned subsidiaries Selene Estate Ltd and Airmid Infrastructure Ltd for a combined value of Rs 285 crore (around $44 million).

Indiabulls has marked Chennai as a non-core market and is taking steps to withdraw from its assets.

The above-mentioned transaction is also expected to be finalised by March 31.

 

The Blackstone-Indiabulls deal ranks among the biggest in the space.

In August, developer DLF Ltd had agreed to sell a 33.34% stake in its rental arm, DLF Cyber City Developers Ltd (DCCDL), to Singapore’s sovereign wealth fund GIC for Rs 8,900 crore ($1.39 billion).

In October, 2016, Canadian firm Brookfield Asset Management has concluded its transaction with Mumbai-based Hiranandani Group to buy its commercial and retail assets in Powai for $1 billion (Rs 6,700 crore).

The deal also marks another instance where a developer has divested stake in its commercial portfolio to an investor amid a prolonged wait for Real Estate Investment Trusts (REITs) to take off in the country.

Developers heavy on commercial and retail assets were expected to tap the public market through REITs to unlock value from their portfolios. However, most players now seem to have shelved those plans.

Blackstone’s India bets
The world’s largest alternative assets manager set up its India office in 2005 and has since invested about $6 billion across private equity and real estate deals. Before this deal, it had pumped in over $2.7 billion across 19 transactions in the real estate sector and manages the largest portfolio of office parks in India.

The firm has of late been in the limelight for acquiring stressed real estate funds across top markets. Blackstone was one of the bidders for the maiden real estate fund of IL&FS PE, besides acquiring Anand Jain’s residential realty fund.

In February, it had also bought into the commercial unit of Mumbai-based developer K Raheja Corp.

Before that, it picked up stake in a key Mumbai property – First International Finance Centre (FIFC) at the Bandra Kurla Complex.

Blackstone was expected to house its commercial assets under a REIT. It is also said to be exploring secondary options.

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Blackstone picking up stake in Indiabulls’ subsidiaries in big-ticket realty deal

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