Blackstone in talks with Bain to sell $480 mln stake in top Indian REIT-sources
24/01/2023 06:35
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A deal will be Blackstone's latest stake reduction in
India REIT
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Blackstone holds 24% of Embassy REIT, plans up to 12%
sale-sources
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Bain Capital eyes investment in Embassy REIT-sources
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Indian office assets a draw for some investors as COVID
wanes
By Sriram Mani
MUMBAI, Jan 24 (Reuters) - Blackstone BX.N is in talks
to sell around half of its stake in India's largest real estate
investment trust Embassy Office Parks EMBA.NS to private
equity firm Bain Capital, two sources said, in a deal worth up
to $480 million at current prices.
A deal would mark U.S.-based Bain's first REIT investment in
India where office space is drawing in investors as many workers
have returned to offices with the waning of the COVID-19
pandemic. For Blackstone, it would mean a further selldown of
its Embassy stake as it adjusts its portfolio.
The talks are still at a preliminary stage, the sources told
Reuters. The plan is to execute the transaction via block deals
on Indian stock exchanges in the coming weeks, though a timeline
or pricing has not been finalized, said the first source who had
direct knowledge of the matter.
A spokesperson for Blackstone declined to comment while
Bain Capital and Embassy did not respond to requests for
comment. The sources did not wish to be named as the discussions
are private.
Embassy Office Parks was India's first REIT to list in 2019.
It owns and operates more than 43.2 million square feet of
office parks and office buildings in cities such as Bengaluru
and Mumbai and is also the largest office REIT in Asia by area.
REITs own and operate real estate assets, similar to how
mutual funds hold stocks. They earn rent from the properties
they manage, which they use to distribute dividends to
investors.
Blackstone currently owns 24% of the Embassy REIT, which has
a market capitalisation of nearly $4 billion. The private equity
group is planning to sell about 10%-12% of it, the sources said.
That will be worth $400 million-$480 million based on Monday's
closing price of the Embassy REIT on the stock exchange in
Mumbai.
A block trade will be Blackstone's fourth stake sale in
Embassy, following sales in 2020, 2021 and 2022. In September,
Blackstone sold $400 million in the REIT to investors including
the Abu Dhabi Investment Authority.
Even as inflation concerns weigh, India's economy has
rebounded since the COVID pandemic to become one of the fastest
growing major economies in the world.
Knight Frank said this month that Bengaluru and Mumbai
recorded the highest office rental growth in the Asia-Pacific
market during October-December, adding that Indian cities'
office rentals are expected to rise over the next year.
Bain Capital, which manages more than $160 billion in assets
globally, has already invested more than $3 billion in India in
the past decade, including in leading Indian private lender Axis
Bank AXBK.NS .
For Blackstone, it's about cashing in.
If a deal is completed with Bain, Blackstone would have sold
units worth $1.4 billion in the Embassy REIT over the last three
years, said the first source.
"Blackstone's strategy to pare its Embassy stake is to churn
its capital. Office assets in India have matured and Blackstone
is looking at investing in emerging asset classes like retail
and data centres where the returns can be higher," said Shobhit
Agarwal, chief executive of Anarock Capital.
"It is placing a bet on the domestic consumption story."
While Blackstone is selling its stake in some REITs, it is
also investing in new assets, indicating it continues to remain
bullish about the India real estate landscape, Agarwal added.
The U.S. group has invested more than $11 billion in Indian
companies and assets over the years.
(Reporting by M. Sriram; Additional reporting by Aditi Shah in
New Delhi; Editing by Aditya Kalra and Muralikumar Anantharaman)
((Sriram.Mani@thomsonreuters.com;Twitter: @followthemani))