GIC in talks to buy Shriram Properties’ IT SEZ Gateway for $136M

Singapore's sovereign wealth fund GIC is in advanced talks to acquire an IT SEZ of Southern developer Shriram Properties for Rs 850 crore ($136 million), people familiar with the development told VCCircle.

The SEZ forms part of an integrated development called The Gateway SEZ located in Chennai. The entire project is spread across 58 acres with 40 acres designated for IT offices and the rest for residential development. The project is a 50:50 joint venture between the Bangalore-headquartered realtor and SUN-Apollo Real Estate Fund (which is a JV between the Khemka family-promoted SUN group and AREA Property Partners, earlier called Apollo Real Estate Advisors).

“GIC is close to buying out both the developer and investor,” a person close to the development told VCCircle.

Meanwhile, the residential part of the development has also seen new investment. It is learnt that HDFC Property Fund has put in Rs 310 crore and with that SUN-Apollo has exited the project. SUN-Apollo had invested across commercial and residential parts of the development.

“The investor has made close to 2x on its investment from the exit from residential segment of the project,” said a person who did not wish to be named.

Emails written to the spokesperson of Shriram Properties and GIC did not elicit any response.

The developer has been out in the market to sell the asset for a long time now. The project had earlier elicited interest from Xander Advisors and Singapore-headquartered Ascendas, which specialises in technology parks. 

The development comes amid Shriram's plans to float its IPO by next year. It raised funding of Rs 480 crore at entity level (holding company) from Tata Opportunities Fund last year and recently raised Rs 80 crore for its ongoing project Greenfield from Motilal Oswal.

As for GIC, this will mark its fifth investment in the last three-four months if the deal goes through. The investor has been consistently increasing its exposure to Indian real estate market across the residential and commercial space.

In December last year, it sealed a deal with North-based developer Vatika Group to jointly develop two residential projects. On the residential front, it has a $247 million joint venture with southern realtor Brigade Group for investment and development of projects in South India. On the commercial front, it recently acquired a significant minority stake in public listed IT park owner Nirlon Ltd for Rs 660-784 crore ($105-124) and also bought a SEZ in Bangalore from Hindustan Unilever Ltd.

It is also exposed to the sector through its investment in a real estate focused non-banking finance company (NBFC) set up by KKR.

The outlook for commercial real estate is positive for 2015 as leasing activity is expected to pick up on the back of improved macro activities. According to Cushman and Wakefield, total office absorption stood at around 8 million sq ft in the first quarter of 2015, up by 35 per cent year on year, with Chennai and Bangalore being the top performers driven by IT and ITeS.

(Edited by Joby Puthuparampil Johnson)

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