GIC, Brigade to invest Rs1,500 crore in real estate

Bengaluru: The list of large sovereign wealth funds and pension funds chasing Indian real estate has grown longer, with sovereign wealth fund Government of Singapore Investment Corp. Pte Ltd(GIC) entering into Rs1,500 crore joint venture agreement with Brigade Enterprises Ltdto invest in projects in South India.

The Bangalore-based property developer and GIC, through an affiliate company, will create an investment platform, through which it will invest in and acquire land for residential and mixed-use developments—including shopping malls and offices—in cities in southern India, Brigade said on Monday.

The Brigade-GIC tie-up follows a slew of pension and sovereign funds who have partnered with individual developers to invest in real estate projects, giving the sector a much-needed flush of capital, both in the form of debt finance and equity.

In February, Piramal Enterprises Ltdsigned a strategic alliance with CPPIB Credit Investments Inc., a wholly-owned subsidiary of Canada Pension Plan Investment Board (CPPIB), for a $500 million realty debt fund, where each would initially put $250 million in the debt fund that will offer rupee debt financing to residential projects across India’s major urban centres.

In May, Xander Group Inc.and an investor consortium led by Dutch pension fund asset manager APG Asset Management NVannounced a $300 million venture to buy income-generating commercial office assets across India’s main office markets. Before this in 2012, APG and Godrej Properties Ltdformed a residential platform to invest Rs770 crore.

The Qatar Investment Authority (QIA) has also invested Rs1,600 crore—Rs800 crore in two tranches—in Bangalore-based RMZ Corp.to invest in commercial office projects.

Brigade’s association with GIC goes back to 2012, when the developer and GIC affiliate Reco Begonia jointly bought a piece of land in Whitefield in Bangalore from Hindustan Unilever Ltdfor Rs125 crore.

The first joint venture project, Brigade Cosmopolis, will be home to over 880 families and is under construction, said Suresh Kris, chief financial officer, Brigade Enterprises. The investment will be made in the form of equity. “Instead of investing project by project, it made sense to build a platform to speed up the process and also get a commitment,” said Kris, adding that the focus will be on Bangalore, Chennai and Hyderabad.

Lee Kok Sun, managing director and co-head (Asia), GIC Real Estate Inc., said in a statement, “As a long-term value investor, GIC is believer in India’s growth potential. We seek partners who share our philosophy and values and have a reputable track record in the markets in which they operate. We are therefore pleased with the opportunity to partner Brigade, one of the leading developers in South India, in this joint venture.”

Property analysts said while these funds invested through private equity (PE) funds before this, in the form of limited partners (LP), they have now chosen to partner developers directly.

“Many fund managers weren’t able to deliver promised returns, which is why pension funds like these became disillusioned,” said Ambar Maheshwari, managing director (corporate finance) at Jones Lang LaSalle India, a property advisory firm.

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