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GIC inks initial pact to pick up stake in Prestige’s office portfolio

26 February, 2018

Singapore’s sovereign wealth fund GIC has signed a preliminary term sheet with Bengaluru-based Prestige Estates Projects to pick up a significant minority stake in Prestige Exora Business Park, the developer said in a stock market notification.

Exora Business Park is a wholly-owned subsidiary of Prestige and owns, directly or indirectly, many operating and under-construction office properties.

The development comes days after VCCircle reported that GIC is in an advanced stage of discussions to pick up a stake in the rental arm of the developer. The report had details on how the developer was trying to bring an investor on board for its core assets.

The proposed deal will help Prestige set up a commercial platform to acquire and construct assets and add to its existing portfolio. It would also help the investor-developer duo to float a real estate investment trust in due course of time. Real estate investment trust (REIT) has taken time to kick off in the Indian real estate market despite several measures taken by the government.

In the run-up to the proposed deal, Prestige had bought back stakes of investors from a bunch of projects. In December, it had bought back a 66.66% stake in group company Prestige Projects Pvt. Ltd from private equity firm Red Fort Capital and landowners for Rs 324 crore. Earlier, it had purchased CapitaLand’s stake in a commercial project in Bengaluru.

The developer also held discussions with Canada Pension Plan Investment Board (CPPIB) for the deal, but it fell through due to a mismatch in expectations.

As and when GIC concludes its deal with Prestige, it will further solidify GIC’s position in India’s commercial real estate. The sovereign wealth fund, which has been aggressively chasing deals in the realty market, had recently bought a 33% stake in DLF’s rental arm. The tie-up has created one of the biggest platforms in the Indian real estate market.

The rental arm will acquire stable rent-yielding assets, besides developing projects organically.

If the proposed deal with Prestige goes through, GIC will be able to spread its presence across geographies in India. While DLF has a solid presence in North India, Prestige’s assets will give it exposure to projects in Bengaluru and surrounding areas. GIC also has a substantial stake in Mumbai-based public-listed Nirlon Ltd.

With back-to-back deals, GIC will also run shoulder-to-shoulder with realty biggie Blackstone, which has accumulated rent-yielding assets in the country over the years. Blackstone is now preparing to float the first public REIT in India.

While GIC has made its presence felt in the commercial segment of the market, it is yet to take a substantial exposure in other rent-yielding segments. However, it has stakes in a few malls.

Prestige Estates Projects
Prestige has a rental portfolio of nearly 9 million sq ft, which includes commercial offices, special economic zones, malls and hospitality projects. It has presence in residential, office, retail and hospitality segments. It operates across south India, Pune, Goa and Ahmedabad. It claims to have completed 210 projects with a developable area of 80 million sq ft and has 53 ongoing projects across segments. The company’s consolidated revenue for 2016-17 was at Rs 4,862 crore.

Bengaluru-based Prestige has, of late, realigned its businesses to bring investors on board for different verticals. Recently, it had tied up with HDFC Capital Advisors Ltd, the real estate asset management arm of mortgage lender HDFC Ltd, to create a $390-million platform for low-cost housing projects in the country.

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GIC inks initial pact to pick up stake in Prestige’s office portfolio

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