MUMBAI/BANGALORE: Embassy Office Parks, a joint venture between private equity firm Blackstone Group and office space developer Embassy Group, is in advanced talks to acquire three large IT parks spread over two million sq ft each in Bangalore, Pune and the National Capital Region (NCR) for Rs 3,000 crore.
“The deal will be closed in less than a year,” Michael Holland, CEO of Embassy Office Parks told ET in an exclusive interaction. Michael Holland added that the talks were initiated in the second half of last year, the period that he described as “the low point in Indian real estate”.
The company , which earns about Rs 700 crore per year through rentals of office properties, is looking to finance the proposed acquisitions through its rental income, shareholders’ equity and internal accruals.
The total office space developed by the company will increase from 16 million sq ft at present to 28 million sq ft in the next five years, Holland said, adding, “With acquisitions, we will be at 40 million sq ft in the next five years.”
The company recently acquired Vrindavan Tech Village for about Rs 1,951 crore in one of the largest commercial real estate transactions in India. Holland clarified that the company was not involved in talks to acquire Four Seasons hotel project in Bangalore. CityView, the mixed-use development property in the city has a 230-key Four Seasons hotel and 110 serviced residences.
Blackstone Group has been acquiring income-earning office properties in India for the past two years through its various joint ventures with developers like Embassy Group and Panchshil Realty.
While Embassy Office Parks is building its portfolio, it is also working on capitalisation plans, including a Real Estate Investment Trust (REIT). “In less than two years, there will be a capital event (for Embassy Office Parks),” Holland said.
“We have potential for $2 billion REIT….REIT is one of the options, but not the only option. We can even consider other options like a REIT in Singapore, traditional IPO or private equity induction.”
Income generated by REITs will be taxed at the hands of investors, finance minister Arun Jaitley had announced last week in his budget speech.
However, Holland said, more clarity was required on certain issues including treatment of capital gains tax, dividend distribution tax and different treatment of loans raised by domestic and foreign investors.
“We hope to get more clarity on REITs here following budget for 201516. We will review the possibility of listing a REIT here in the spring of next year,” he said.
Blackstone-Embassy JV plans to buy 3 IT parks for Rs 3000 crore