Blackstone converts Indian property to safe haven
06/10/2022 13:59
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own. Refiles to add chart.)
By Una Galani
MUMBAI, Oct 6 (Reuters Breakingviews) - A global
downturn could boost demand for Indian real estate. Thanks
largely to Blackstone BX.N , there’s now an easier way in. The
investor-cum-landlord led by Steve Schwarzman has played a big
role in developing a local market for real estate investment
trusts. Now it’s preparing to float a collection of glitzy
shopping malls in what would be only the country’s fourth
publicly traded REIT. It’s well timed.
Blackstone, whose overall real-estate portfolio tops out
near $580 billion, started buying at scale in India in 2011.
It’s now the country’s largest owner of office buildings,
focusing on corporate parks and leasing more than half of its
space to technology-focused clients from Cisco CSCO.O to Sony
6758.T . India has bagged 47% of Blackstone’s $8 billion of
Asia-targeted property acquisitions since 2016, per Dealogic.
The asset manager floated India’s first two REITs: in 2019
came Embassy Office Parks EMBA.NS , Asia’s largest by area,
with Mindspace Business Parks MINS.NS a year later. In a sign
of a well-developing market, Blackstone engineered a successful
sale of 8% of its Embassy stake last week, having exited
Mindspace in full in January. Brookfield Asset Management
BAMa.TO BAM.N took a third REIT public last year.
The structure has brought a bit of discipline to an often
unruly market. It lets investors cash out while keeping the
building’s management in place to ensure tenants remain
well-served. Earlier, buildings were sold floor by floor.
Embassy’s dividend yield is 6.2% against 7.4% for the
coupons on India’s 10-year bonds. But there’s capital
appreciation, too: India’s office REITs delivered returns of up
to 27% in the past year, compared with a 2% decline in the Nifty
50 Index .NSEI where dividend yields average less than 2%.
Office-focused real estate trusts like Embassy might fare
well even if the world tips into recession. Its leverage is low
and past downturns have prompted international companies to
outsource more jobs to India. Physical occupancy is steadily
rising as employees go back to the workplace.
Blackstone’s shopping malls are likely to prove a similar
hit. There’s a limited supply of nice ones, and rich Indians
have emerged from the pandemic largely unscathed, which bodes
well for premium retail rents. The Abu Dhabi Investment
Authority was a buyer for some of the Embassy shares through a
realty fund partner. Other global funds looking to put a good
roof over their long-term investment needs will follow.
Follow @ugalani on Twitter
CONTEXT NEWS
Blackstone-owned Nexus Malls is preparing to float a
portfolio of Indian shopping malls. The offer could be worth up
to $500 million, per Refinitiv publication IFR.
On Sept. 27, Blackstone raised $325 million from selling an
8.1% stake in Embassy Office Parks REIT, per IFR. Kotak Realty,
a fund backed by the Abu Dhabi Investment Authority, bought
shares in the block deal, Indian media reported.
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(Editing by Antony Currie and Thomas Shum)
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