Indian Economy News

Blackstone, Panchshil to invest Rs.750 crore to develop Pune IT SEZ

Bengaluru: Global private equity fund Blackstone Group Lp and Panchshil Realty are going to invest Rs.750 crore to develop a 15-acre information technology (IT) special economic zone (SEZ) in Pune’s Kharadi area, according to two people familiar with the development.

This will be the second phase of Eon Free Zone, India’s first notified IT SEZ and a fully-built and leased out 4.5 million sq. ft of office space across 45 acres. In 2013, US-based Blackstone invested Rs.450 crore in the project developed by Panchshil in return for a 50% stake.

“The investment is towards buying the land and developing the project. The land has been bought and unlike the first phase, which only had an FSI (floor space index) of 1, the new project is allowed an FSI of 3. With this increased FSI, around 2 million sq. ft of space can be developed,” said one of the two people aforementioned, on condition of anonymity.

FSI is the amount of construction allowed on a piece of land.

Panchshil Realty chairman Atul Chordia confirmed the new project development and said Blackstone will share a 50% stake in this project as well. “We expect to get the project sanctions this month and expect to launch the project in the September quarter,” Chordia said.

Blackstone declined to comment.

With this, Blackstone has invested in a number of IT SEZs in Pune. These include Blueridge SEZ from IDFC Alternatives Ltd in 2014 and a DLF SEZ under DLF Ackruti Info Parks (Pune) Ltd in 2011.

Blackstone, the largest owner of commercial real estate in India with nearly 32 million sq. ft of office space, has not slowed down its pace of acquisitions, steadily buying out projects across cities such as Mumbai, Bengaluru, the national capital region (NCR) and Pune.

Almost 65-70% of this space is leased out and only a part of the portfolio is under construction. Blackstone doesn’t own 100% stake in these assets and has partnerships with developers in quite a few of them.

Economic activity in India’s commercial office space has been radically different from the residential property sector, which has been battling a prolonged spell of slow sales and peaking inventory levels.

According to a July market report by property advisory Cushman and Wakefield, the net office absorption in the top eight cities will be recorded at 36.5 million sq. ft by the end of 2015, an 18% rise compared over 2014. Bengaluru is expected to lead with around a 34% share in this, ranging between 9 million sq. ft and 12 million sq. ft by the end of 2015.

The first half of 2015 saw the top eight cities recording overall net absorption of 17.9 million sq. ft for office space, a 32% increase over the first half of 2014.

“Regained expansion momentum, mainly in the IT-ITeS (IT-enabled service) sector resulted in highest percentage increase in office space net absorption in Bengaluru (174%) and Pune (162%) over the same period last year,” the report said.

This year, so far, Blackstone has acquired the 247 Park Office project from Hindustan Construction Co. Ltd’s real estate arm and IL&FS Milestone Realty Advisors for Rs.1,060 crore and bought Oxygen, a SEZ in NCR, from 3C Company for around Rs.620 crore.

In early 2014, Blackstone and Pune-based Panchshil had also acquired Mumbai’s iconic Indian Express Towers for nearly Rs.900 crore.

“There are a number of private equity funds that are looking at buying office properties, but Blackstone, having picked up the choicest of assets at reasonable costs, when the market was down, has the first mover advantage,” said Ravi Ahuja, executive director, Cushman and Wakefield India.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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