MUMBAI: Wall Street bellwether
Goldman Sachs is set to invest $300 million (Rs 1,850 crore) in a joint venture
company floated by listed developer Nitesh Estates, which will own and operate
commercial real estate assets in India, people directly aware of the matter
said.
Goldman will hold 74%, leaving
Bangalore-based Nitesh Estates with 26% in the JV entity with plans to acquire
rent-yielding office parks, shopping malls and luxury hotels, sources added.
The impending deal is a proprietary investment from the Goldman Sachs balance
sheet which has assets estimated at over $900 billion.
It joins a growing list of marquee
global investors like Blackstone, Brookfield Asset Management, Qatar Investment
Authority and GIC of Singapore which have been buying into India's over
400-million-sqft commercial real estate market over the last few years.
India's services-led economy - the
fastest growing in the world - has thrown up a stable market for
income-generating commercial real estate, giving investors a chance to list
these assets through real estate investment trusts (REITs). These trusts are
listed entities holding income-generating real estate assets from which
earnings are distributed to shareholders. The Indian market regulator came out
with REIT guidelines last year to help real estate and infrastructure
developers list their rent-yielding assets, and providing large and small stock
market investors with an inflation-indexed product.
Goldman Sachs is partnering with the
first-generation entrepreneurial company Nitesh Estates, founded by 37-year-old
Nitesh Shetty, to create a platform of assets worth almost $1 billion in the
next few years. The still unnamed JV, on which a battery of top lawyers are
completing due diligence, is expected to employ leverage financing of up to
three times the equity commitment to go on a shopping spree.
Shetty, who built India's first Ritz
Carlton Hotel, has in the past worked with several big global investors
including Och-Ziff, Apollo Management and Citigroup. When contacted, he
declined to comment on speculation. Goldman Sachs, too, offered no comments on
this story.
Last week's Union Budget provided
some tax clarity on REITs even though certain structuring challenges still
remain. Four Indian developers - Embassy Office Parks (Blackstone), K Raheja
Corp, RMZ Offices (Qatar Investment Authority) and Prestige Group - are
readying to list their assets, which could translate into at least a
$20-billion REIT market in the next few years.
The Indian market would rival or
surpass Mexico's REIT market, often cited as a successful new world experiment,
launched three years ago and with a current market value exceeding $18 billion.
New York, London and Singapore have hogged the limelight in developed market.
New York-listed Brookfield Asset
Management, with real estate and infra assets worth over $200 billion globally,
struck the single largest deal when it acquired the office parks of Unitech for
$1 billion - $400 million in equity and $600 million in debt. Private equity
giant Blackstone Group, too, struck office park acquisitions worth more than $1
billion in recent years in India.
Blackstone-backed Embassy Office
Parks and Brookfield India, with 21 million sqft and 17 million sqft
portfolios, are among the top five office landlords in the country.
DLF tops the list with around 30
million sqft.
While foreign investors have mostly
invested in office buildings, that too specifically in 125-million-sqft IT SEZs
until now, they are turning to the country's hotels and shopping malls which
have remained undervalued or, in some cases, distressed assets for a while.
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