Blackstone to Sell Half of Its Stake in India's Largest Real Investment
According to two sources, Blackstone is in talks to sell roughly half of its stake in India's largest real estate investment trust, Embassy Office Parks, to private equity firm Bain Capital in a deal worth up to $480 million at current prices.
A deal would be Bain's first real estate investment trust (REIT) investment in India, where office space is attracting investors as the COVID-19 pandemic fades. It would imply a further selldown of Blackstone's Embassy stake as it adjusts its portfolio.
According to the sources, the talks are still in the early stages. Based on the first source with direct knowledge of the matter, the plan is to execute the transaction via block deals on Indian stock exchanges in the coming weeks, though no timeline or pricing has been finalised.
Blackstone declined to comment, and Bain Capital and Embassy did not respond to requests for comment. The sources did not want to be identified because the discussions were private.
In 2019, Embassy Office Parks became India's first REIT to go public. It owns and operates over 43.2 million square feet of office parks and buildings in cities such as Bengaluru and Mumbai, and it is also Asia's largest office REIT by size.
REITs own and operate real estate assets in the same way that mutual funds do. They collect rent from the properties they manage and use it to pay out dividends to investors.
Blackstone owns 24% of the Embassy REIT, which has a market cap of nearly $4 billion. According to the sources, the private equity group intends to sell 10% to 12% of the company. Based on the Embassy REIT's closing price on the Mumbai stock exchange on Monday, this will be worth $400 million to $480 million.
Following sales in 2020, 2021, and 2022, a block trade will be Blackstone's fourth stake sale in Embassy. Blackstone sold $400 million in the REIT to investors including the Abu Dhabi Investment Authority in September.
Despite concerns about inflation, India's economy has recovered since the COVID pandemic to become one of the world's fastest growing major economies.
According to Knight Frank, Bengaluru and Mumbai had the highest office rental growth in the Asia-Pacific market from October to December, and office rentals in Indian cities are expected to rise over the next year.
Bain Capital, which manages more than $160 billion in assets globally, has already invested more than $3 billion in India over the last decade, including in Axis Bank, India's leading private lender.
It's all about cash for Blackstone.
If the deal with Bain is completed, Blackstone will have sold $1.4 billion in Embassy REIT units over the last three years, according to the first source.
"Blackstone's strategy to pare its Embassy stake is to churn its capital. Office assets in India have matured and Blackstone is looking at investing in emerging asset classes like retail and data centres where the returns can be higher," said Shobhit Agarwal, chief executive of Anarock Capital.
"It is placing a bet on the domestic consumption story."
While Blackstone is selling its stake in some REITs, it is also investing in new assets, indicating that it is still optimistic about the Indian real estate market, according to Agarwal.
Over the years, the US group has invested more than $11 billion in Indian companies and assets.