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Xander trumps Ascendas to buy Shriram’s Chennai SEZ for $190 mn

02 May, 2017

Alternative investments firm The Xander Group Inc has agreed to buy a special economic zone (SEZ) in Chennai from realty firm Shriram Group for Rs 1,250 crore ($190 million) and has committed another Rs 1,040 crore to expand the project.

Xander gets 1.7 million sq ft space in the operational SEZ and Shriram will deliver another 1.9 million sq ft, it said in a statement.

The SEZ is part of the mixed-use project The Gateway, a 58-acre integrated township project that also includes office space, a shopping mall and residential apartments. Shriram will continue to develop and own the residential and retail components covering 2.6 million sq ft.

The SEZ has been on the block for some time now. A slew of investors, including Ascendas, Xander, GIC and Mapletree, had been engaging with the asset owner to acquire it over the years.

VCCircle had reported last year that Ascendas was in an advanced stage of discussions to clinch the deal. But a valuation mismatch derailed that transaction.

The deal with Xander is almost final but money is yet to be transferred.

“This acquisition demonstrates our continued interest in large, well-positioned assets with growth potential across gateway cities in India, and complements our existing office portfolio,” said Rohan Sikri, senior partner, The Xander Group.

“We see an opportunity to deliver additional high-quality supply in a market where vacancy is rapidly falling,” he said.

M Murali, managing director, Shriram Properties, said the project is well connected to both the city and suburbs. “Addition of residential, office and retail space over the next three years will make it the most strategic location to invest in Chennai,” he said.

Xander has agreed to buy the asset from its platform with Dutch pension fund APG. In 2014, it had formed a $300 million platform with APG to buy into income-generating and institutional-grade commercial assets across India’s main office markets. The platform has the option to expand its corpus to $500 million.

While the platform was formed three years ago, it has been slow on striking deals in the commercial real estate market, especially at a time when income-generating commercial assets have been the only bright spot in the real estate sector in India.

APG, which is active across all the segments of the real sector in the country, recently bought into retail assets of The Xander Group (these assets are housed under Virtous Retail) and committed capital to grow the platform.

The Gateway project
The project has residential and retail elements, besides an IT/ITES SEZ. The commercial portion of the project is spread across 1.8 million sq ft, of which 1.7 million sq ft is fully constructed and leased out. There is scope to develop another 1 million sq ft.

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 Shriram Properties and SUN-Apollo Real Estate Fund. SUN-Apollo, in turn, is a JV between the Khemka family-promoted SUN group and AREA Property Partners, which was previously called Apollo Real Estate Advisors.

The residential part of the development had seen a fresh investment with HDFC Property Fund putting in Rs 310 crore to give exit to SUN-Apollo. SUN-Apollo had invested across both commercial and residential parts of the development.

Commercial real estate
At a time when the real estate market is in tatters, income-generating assets across commercial and retail segments have been gaining traction. According to a recent report by real estate consultancy CBRE, 2016 was a landmark year for the sector, with record absorption levels of over 43 million sq ft, reflecting a 9% year-on-year growth.

The high absorption levels and global investor interest will continue to bring life into India’s office sector in 2017. The office space is likely to maintain its momentum with an anticipated absorption of 40 million sq ft, CBRE said.

“The outlook for 2017 is positive with an expectancy of steady growth, stability and revival in the market,” said Anshuman Magazine, chairman, India and Southeast Asia, CBRE.

Earlier this year, in one of the largest transactions in the real estate sector, Singapore sovereign wealth fund GIC agreed to buy into the rental arm of DLF Ltd in a deal estimated to be around Rs 12,000-14,000 crore.

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Xander trumps Ascendas to buy Shriram’s Chennai SEZ for $190 mn

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