Dutch pension fund major APG forms $300M venture with Xander to buy office properties in India

Emerging markets investment firm The Xander Group Inc. and an investor consortium led by Dutch pension fund asset manager APG Asset Management NV, has announced the creation of a $300 million (Rs 1,800 crore) venture that will buy income generating, institutional grade commercial assets across India’s main office markets.

As per the arrangement, the partners can expand the size of the venture to $500 million in the future.

The venture aims to capitalise on the continued strong tenant demand for office space, predominantly from companies in the IT and financial services industries that serve their global businesses from hubs across India. The venture will solely focus on built and significantly leased office assets in Mumbai, NCR, Bangalore, Hyderabad, Chennai and Pune. 

Sachin Doshi, head of non-listed real estate for Asia-Pacific at APG in Hong Kong, said, "In spite of the recent slowdown, India's top six cities have consistently witnessed the largest net absorption of office space in the Asia-Pacific region and perhaps globally. This, combined with limited new development starts for office projects in India, creates a unique demand-supply gap for good quality office space that our venture aims to target."

APG manages pension assets of 4.5 million active and retired individuals from both private and public sectors, totalling about €352 billion (as of February 28, 2014).

Two years ago APG inked a similar venture in partnership with Godrej Properties for the residential side of the market. In that deal, Godrej Properties secured commitments of Rs 770 crore ($138 million) from a group of foreign investors, led by Dutch pension fund manager APG and also including asset management firm Sparinvest Property Investors, for a residential property development platform. The investors acquired 71 per cent stake in the joint venture while Godrej Properties owns the rest.

Rohan Sikri, partner at Xander Investment Management Pte. Ltd., Singapore, said, “This new India office venture is part of our continued effort to develop specialised platforms with the right partners, for unique strategies that deliver the required risk adjusted returns to them.”

He said the Indian office market has been relatively resilient through the bad economic environment of the last few years but cautioned that buyers of Indian office assets need to have the skill to identify and address complex title, construction and regulatory risks, and sweat the real estate after acquisition to preserve and create value. “It requires patience, attention to detail and local real estate expertise,” he added.

The Xander Group Inc. is a global investment firm focused on the infrastructure, hospitality, retail and real estate markets. Since 2005, the firm has committed over $2 billion of capital to the Indian market across private, public and credit investments.

Such platform partnerships are gaining ground in Indian realty space. Besides APG’s previous alliance with Godrej Properties, Canadian pension fund manager Canada Pension Plan Investment Board (CPPIB) also has struck two such deals, one each for residential properties and office buildings. 

Last November, CPPIB and Shapoorji Pallonji Group  formed a strategic alliance to acquire foreign direct investment (FDI)-compliant, stabilised office buildings in the major metropolitan areas in India. CPPIB owns 80 per cent of the venture with an initial equity commitment of $200 million.

More recently, CPPIB, through a separate arm CPPIB Credit Investments, also joined hands with business conglomerate Piramal Enterprises Ltd to offer rupee debt financing to residential projects in major urban centres of India. The two partners have committed an initial investment of $250 million each for the same. Indiareit Fund Advisors, the real estate fund management arm of Ajay Piramal-led Piramal Enterprises, has been appointed as advisor for the alliance.

(Edited by Joby Puthuparampil Johnson)

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