IndoSpace in talks with investors to raise funds via private REITs

IndoSpace, a joint venture between Everstone Capital and industrial real estate firm Realterm, is in advanced stages of discussions with a clutch of marquee investors to raise funds through private real estate investment trusts (REIT).

The Mint newspaper, citing three people aware of the development it didn’t name, said Singapore state investment firm Temasek Holdings Pte and sovereign wealth fund GIC, Canada Pension Plan Investment Board (CPPIB) and Abu Dhabi Investment Authority (ADIA) are likely to invest in IndoSpace's assets that could fetch a valuation of around $2 billion.

The report said that the potential gains from the REIT have attracted top global investors and that the transaction is likely to be closed in a few weeks. “Talks are at an advanced stage with these four funds. It is likely that a couple of them will write the cheque together, as it is a very large sum of money,” the report said citing one of the persons.

The report also cited Sameer Sain, co-founder and managing partner of Everstone Group, as saying that the company was in the process of rolling its developed assets into a private REIT structure and that it was in talks with a few potential investors.

Citibank is advising IndoSpace on the transaction, the report said.

The news comes soon after The Economic Times in May reported that Everstone was planning to list its warehousing and logistics assets under REITs and that it had appointed Citi and Jones Lang LaSalle to help it with Singapore and India listings.

IndoSpace has 17 industrial and logistics parks in Pune, National Capital Region, Bengaluru and Chennai, and plans to invest $1 billion in the country in the next five years to take its total investment to $1.75 billion. This will take its development pipeline from 20 million square feet to 50 million square feet.

The Indian partner of the joint venture—Everstone Group—is a home-grown private equity firm focused on India and Southeast Asia and has $3.3 billion under management. Realterm, which has presence across North America, Europe and India, manages approximately $2.5 billion across 300 operating and development properties.

IndoSpace has so far raised two funds–IndoSpace Logistics Park I with a corpus of $240 million and IndoSpace Logistics Park II of $344 million corpus.  

REITs, a new fundraising avenue that offers regular income and appreciation to investors, is on the radar of a slew of developers sitting on commercial, retail and industrial real estate. However, given the slow movement on launch of REITs due to tax complexities, asset owners are roping in global investors and PE firms in the meanwhile to unlock value and test the market to check for valuation.

DLF Ltd, one of the biggest owners of commercial real estate in the country, is in the last leg of a transaction that will see the company’s promoters give up a 40% stake in the rental arm. The assets will eventually be listed under REITs, as per the company’s plan.

Mumbai-based K Raheja Corp has put its REITs listing plan on the back burner and is now in the process of selling a minority stake in its commercial real estate arm to global investors through a private transaction.

While office space has been a favourite among global investors over the years, real estate experts believe that the warehousing and logistics sector in India is on the radar of investors. According to JLL India, the sector received investment of Rs 1,438 crore through two major deals in 2015. This made the overall foreign private equity inflow into the sector more than even the sum of five deals – Rs 1,350 crore – that took place in 2012.

“The promise of high growth in warehousing and logistics is luring not only foreign investors but also private equity firms to India. Policies allowing 100% foreign direct investment in warehouses and food storage facilities under automatic routes as also declaring some zones to be tax-free has made the sector appear on the foreign PE investment radar,” it said.

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