US private equity giant Blackstone Group is set to acquire property developer Prestige Group’s rental income assets for more than $1.7 billion (Rs 12,745 crore) in the largest real estate portfolio buyout in India, said three persons with direct knowledge of the matter.
If the deal goes through, Prestige will use the money to repay all of its debt and deploy the rest as equity capital for growth, they said. The transaction involves ready, income-producing and under-construction properties in key cities of south India, including Bengaluru, Chennai and Mysore. It will be Blackstone’s single largest realty investment in the country and will also eclipse the $1-billion raised through listing of India’s two real estate investment trusts (REITs) — Embassy and Mindspace Business Parks.
Blackstone declined to comment. Prestige Group didn’t respond to queries. “The term sheets have been signed and the deal is set to be concluded in the next few weeks,” said one of the persons. Blackstone will acquire 100 per cent control of around 20 million square feet of commercial space, including 16 million sq ft of ready and completely leased assets.
The deal will include the developer’s nine operational malls and the combined assets, after adding Blackstone’s retail entity Nexus Malls, will double the private equity firm’s retail portfolio size. The acquisition will also include a portion of the group’s hospitality assets, said the people cited above. “The deal is somewhat similar to the DLF-GIC investment. Prestige is looking to deleverage its balance sheet with this transaction and prepare itself for the next phase of growth,” said one of the persons. “Aided by its execution capability and funds, it is planning to build another commercial assets portfolio over the next five years.”
Prestige Estates Projects closed at Rs 224.75, up 1.7 per cent, on the BSE Friday. Prestige Group’s net debt was Rs 8,174 crore at end of March at a debt-equity ratio of 1.46. It posted rental revenue of Rs 1,050 crore through its annuity portfolio in FY20. Once the transaction is complete, the Bengaluru-based developer will go ahead with plans to build a commercial portfolio of a total 32 million sq ft in the next five years, said the people cited above.
Singapore’s GIC acquired a 33 per cent stake in DLF’s rental assets portfolio for $1.9 billion in 2017. However, the Blackstone-Prestige deal is a complete buyout and comparable with Canadian alternate investment fund Brookfield Asset Management’s $1 billion purchase of Hiranandani Group’s commercial portfolio in Mumbai.
The Covid-19 pandemic has hit the realty sector, adding to liquidity pressure on leveraged businesses. Big private equity firms with dry powder at their disposal are evaluating large deals and a chunk of this money is expected to be earmarked for emerging markets such as India. In the office segment, Prestige has a total 36 million sq ft of completed projects, 15 million sq ft of ongoing projects and 22 million sq ft under planning. In retail, the company has 10 operational projects of 7.5 million sq ft space. In hospitality, the company has ready inventory of 1,262 keys, yielding revenue of Rs 327.5 crore annually.