10 July 2018

1. Blackstone, Brookfield, Ascendas in race to buy Chennai IT Park

The commercial property has 2.7 million sq ft of leasable space and is 99.4% occupied. Amazon India, World Bank, HSBC and BNP Paribas are some key tenants to have leased space in the property.

(Source: ETRealty, 28 June, 2018)

Research View

As per secondary sources, global private equity players such as Blackstone Group, Brookfield Asset Management and Ascendas-Singbridge Group are in plans to acquire the Grade A office park ‘SP Infocity’, located in Old Mahabalipuram Road (OMR) pre-toll micromarket in Chennai. The private equity inflows in premium quality rent-yielding Grade A commercial assets have been increasing across Indian cities since 2016, and the momentum is being continued in 2018 as well. In Q2 2018, Blackstone acquired One Indiabulls Park admeasuring 1.9 million sq ft (0.17 million sq m) in around INR 900 crores (USD 131 million). In our opinion, the rising investments on commercial office assets in Indian cities is due to increasing demand for Grade A office space, large employment generation across various sectors that require more additional office space and anticipation on the possibility of first REIT listing in 2018. The business environment is changing with the influence of technology, millennial workforce and government policies. Therefore, it is now becoming essential for the developers to upgrade their portfolios to meet the demands of changing market landscape. In such a scenario, active investment inflows from both foreign and domestic institutional investors to the commercial office assets looks to be a positive indicator.

2. NBCC sells 28,000 sq ft office space in South Delhi for INR 83 cr

State-owned NBCC has sold nearly 28,000 sq ft office space at Okhla in the national capital to Balmer Lawrie & Co for INR 83 crore.

(Source: Moneycontrol, 28 June, 2018)

Research View

The state-owned Navratna Public Sector Unit (PSU) NBCC India has sold 28,000 sq ft (2600 sqm) of office space in Okhla Phase-1 of South-East Delhi. The transaction took place between NBCC India and Balmer Lawrie & Company for a sum of INR 83.3 crore (USD12.1 million), resulting in INR 29750 per sq ft (USD 433 per sq ft), which is higher than the current average capital value in the same micromarket. The sold space is part of the strategically located NBCC Center, which comprises of total saleable area of around 0.23 million sq ft (0.02 million sq m) and is one of the well-equipped mixed-use development in the vicinity. NBCC has been involved in many of the state-driven redevelopment projects across Delhi, which includes the redevelopment of colonies such as Sarojini Nagar, Nauroji Nagar, East Kidwai Nagar and Netaji Nagar. All of these colonies are primarily residential in nature, except for Nauroji Nagar where NBCC is constructing a commercial asset expanding over the total saleable area of around 3 million sq ft (0.2 million sq m). The project will be the first World Trade Center (WTC) in the city, and has already sold around 3 towers out of the total 12 towers in 2017 to PSUs (Public Sector Units) and other private companies via the e-auction process. Lack of availability of Grade A office spaces in the prime locations of the city is making these redeveloped assets a lucrative option for the corporate occupiers aiming to stay near the embassies and other government offices.

3. 

Government sets up panel to sell iconic Air India building in Mumbai, talks with JNPT underway



Multiple floors of the iconic building, which boasts of being India's first structure with an escalator, have been rented out by Air India after the flag carrier shifted its headquarters to Delhi in 2013.

(Source: Moneycontrol, 27 June, 2018)

Research View

The government has initiated discussions for sale of the iconic Air India building at Nariman Point (CBD), Mumbai, to the country’s biggest container port Jawaharlal Nehru Port Trust (JNPT). A committee comprising Secretaries from the civil aviation and shipping ministries has been set up to decide on the valuation of the 23-storey building. The government has been pursuing asset monetisation plan of Air India for long and had sold few properties in Mumbai and Chennai. In our opinion, the Air India building sale to JNPT is in line with the recent government strategy of using one Public Sector Enterprise (PSE) to buy another, as manifested in the buy-out of Hindustan Petroleum Corporation Limited (HPCL) by Oil and Natural Gas Corporation Limited (ONGC), and the current move to get Life Insurance Corporation of India (LIC) to buy the ailing IDBI Bank. As per secondary sources, the Air India building admeasuring approximately 220,000 sq ft (20,438 sq m) is likely to be valued at around INR 1,200 crore (USD 176 million), about 20% higher than capital values prevalent in the micro-market of Mumbai CBD. While part of the premium can be ascribed to the fact that the asset is amongst the trophy assets in Mumbai, a 20% premium appears to be higher than potentially achievable in an open market process. In times to come, we may witness more such asset monetisation by these companies.


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