Mumbai Blackstone is in talks to sell nearly half its stake in India’s biggest real estate investment trust Embassy Office Parks to private equity firm Bain Capital, two sources said, in a deal worth up to $480 million at current prices.
A deal would mark the first of US-based bans REIT Investing in India where office space is attracting investors as many employees have returned to offices with the COVID-19 pandemic subsiding. For Blackstone, this will mean further selling of its Embassy stake as it adjusts its portfolio.
Sources told Reuters that talks are still at an early stage. The plan is to execute transactions via block deals on Indian stock exchanges in the coming weeks, said the first source with direct knowledge of the matter, although a timeline or pricing has not been finalized.
A spokesman 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 Park It was the first REIT in India to be listed in 2019. It owns and operates over 43.2 million sq ft 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 properties, much like 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 Embassy REIT, which has a market capitalization of approximately $4 billion. Sources said the private equity group is planning to sell around 10%-12% of it. It would be valued at $400 million-$480 million based on Monday’s closing price of Embassy REIT on the stock exchange in Mumbai.
The sale will be followed by Blackstone’s fourth stake sale in Embassy in 2020, 2021 and 2022.
Even in spite of inflation concerns, India’s economy has become one of the fastest growing major economies of the world since the COVID pandemic.
Knight Frank this month said Bengaluru and Mumbai recorded the highest office rental growth in the Asia-Pacific market during October-December, adding that Indian cities are expected to pick up office rental growth next year.
Bain Capital, which has over $160 billion in assets under management globally, has invested over $3 billion in India over the past decade, including in leading Indian private lender Axis Bank.
For Blackstone, it’s all about cashing in.
If a deal with Bain is completed, Blackstone would have sold $1.4 billion worth of units in the Embassy REIT over the past three years, the first source said.
“Blackstone’s strategy to delever its stake in Embassy is to churn its capital,” said Shobhit Agarwal, CEO, Office Asset Management in India. Office property in India has matured and Blackstone invests in emerging asset classes such as retail and data centers. doing where the returns can be greater.” Anarock Capital.
“It’s betting on the domestic consumption story.”
While Blackstone is selling its stake in some REITs, it is also investing in new properties, indicating that it remains bullish about India’s real estate landscape, Agarwal said.
American conglomerates have invested over $11 billion in Indian companies and properties over the years.
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