The company is set to close a deal for sale of 21 million sq. ft of real estate with New York-based Blackstone Group
Real estate developer Prestige Group plans to build more than 40 million sq. ft of office space across multiple cities, after selling some of its office, retail and hotel assets to Blackstone Group Lp.
The New York-based private equity giant received approval in December from the Competition Commission of India to buy five office parks, nine shopping malls, two hotels and four under-construction office complexes totaling 21 million sq. ft for $1.5 billion from Prestige. The deal will formally close in the coming weeks.
“We are gearing up to rebuild our office portfolio over the next 5-7 years, which will be a mix of both stand-alone buildings (400,000-500,000 sq. ft) and office parks. This will be Prestige’s 2.0 version, where in a post-pandemic world, new-age office buildings will be designed differently. We believe asset management and technology will play more significant roles,” Juggy Marwaha, CEO, Prestige Office Ventures, said in an interview.
Bengaluru-based Prestige plans to construct projects in Mumbai (7.5 million sq. ft), Hyderabad (4.5 million sq. ft), Pune (1 million sq. ft) and an office and hotel complex in Delhi’s Aerocity (750,000 sq. ft) besides 27-30 million sq. ft of residential projects in Bengaluru.
Prestige’s ambitious plan comes at a time when India’s commercial office sector witnessed a pause after a seven-year bull run. Several global companies have spoken about adopting a hybrid work model amid uncertainty on when people will return to offices.
The projects are well-timed and will come into the market by 2022-end, Marwaha said.
There are also three projects in Bengaluru and one in Kochi that Prestige and Blackstone will develop jointly. Once built, Prestige will hand them over to Blackstone.
“We are bullish on the office market despite some vacancies in certain markets. Our clients have informed us that people are coming back to work this month even if it’s a certain percentage. There is fresh demand for nearly 7-8 million sq. ft of space in Bengaluru alone. There is also big demand from global in-house centres wanting to take some new space,” Marwaha said.
Another Bengaluru-based real estate firm RMZ Corp recently sold around 12.8 million sq ft of its 67 million sq ft portfolio to a fund managed by Canada’s Brookﬁeld Asset Management for an investment value of $2 billion.
The deal helped RMZ to completely deleverage and the company will adopt a hyper growth strategy to develop its portfolio, the developer said in December.
“Deal activity was the highest in 2020 and transaction sizes have increased. Large office developers like RMZ and Prestige have sold their mature assets, pared debt and are poised to start a new development cycle, which is a significant pipeline even without signing new assets,” said Shobhit Agarwal, MD and CEO, Anarock Capital.
With gradual relaxation of the lockdown in the October-December period and better preparedness for the prolonged coronavirus outbreak, businesses especially technology-driven enterprises made a strong comeback and actively began scouting for office spaces in line with their long-term business plans, Knight Frank Research said last week. Leasing transactions picked up in the December quarter compared to the previous quarter.
“In H2 2020, office leasing activity in Bengaluru was highest across the top 8 cities at 7.54 million sq ft, registering an 8% year-on-year growth. The city noted 12.32 million sq ft of gross leasing in 2020,” Knight Frank said.
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