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CPPIB-Shapoorji Pallonji JV acquires IT park in Chennai for $220M

SPREP Pte Ltd, a joint venture formed between Canada Pension Plan Investment Board (CPPIB) and Indian developer Shapoorji Pallonji Group to buy commercial assets in the country, has struck its debut deal with the acquisition of an IT park in Chennai at an enterprise value of $220 million (Rs 1,340 crore), the company said.

The JV platform has signed a definitive agreement to acquire 100 per cent of the securities of Faery Estates Pit Ltd, which owns, operates and maintains SP Infocity IT Park.

“SP Infocity IT Park is a high-quality property and is an excellent first acquisition for SPREP. Through this investment by SPREP, CPPIB continues to demonstrate our long-term commitment to the Indian real estate market,” said Andrea Orlandi, managing director, real estate investments, CPPIB.

The asset is located on Old Mahabalipuram Road, Chennai and has close to 2.7 million square feet of operational space. Its key tenants include HSBC, Amazon, Ford, Siemens, Citibank, AT&T and Hapag Lloyd.

The first deal under the platform has taken some time to fructify. The alliance was struck towards the end of 2013 with the mandate to acquire foreign direct investment (FDI)-compliant, stabilised office buildings in the major metropolitan areas in India.

CPPIB had picked up 80 per cent in the venture with an initial equity commitment of $200 million.

While the Canadian pension fund chases acquisition of commercial assets through this platform, it has a separate JV with Piramal Fund Management for residential properties in India. In February, 2014, it formed an alliance with the unit of Piramal Enterprises to finance housing projects with an initial capital of $500 million from both the partners.

This JV struck its debut deal last year with Advance India Projects Pvt Ltd for a project in Gurgaon.

The Indian real estate market has seen a slew of such platforms for residential and commercial segments over the years. Recently, Bangalore-based realtor Nitesh Estates tied up with financial services giant Goldman Sachs to jointly invest up to $250 million in income-generating commercial assets.

Another Southern developer Brigade Group has a joint venture platform with Singapore's sovereign wealth fund GIC for residential properties in Southern India. The size of the platform is $247 million.

Recently, a joint venture between these two entities acquired a SEZ property in Bangalore.

Even though demand in the residential market remains low across top cities, leasing activity has picked up in commercial property segment in the last couple of months.

Top eight cities in India recorded overall net office space absorption of 7.9 million square feet in Q1 2015, up 35 per cent year on year, with Chennai and Bangalore leading the pack on the back of demand from IT-ITeS companies, according to real estate consultancy firm Cushman and Wakefield.

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