Private equity giant Blackstone Group is in advance talks to acquire Indian real estate developer Prestige Group’s rental income assets for approximately INR 12,745 crore (USD 1.7 billion). While comparing to all previous major deals in India, it is going to be the largest real estate portfolio buyout in India.
The US-based Blackstone Group with investment in tune of USD 1.7 billion will be its single largest realty investment in India. The deal between Blackstone and Prestige Group will be bigger than combined real estate investment trusts (REITs) of the Embassy and Mindspace Business Parks (USD 1 billion).
In India, Blackstone Group manages three business verticals such as private equity, real estate, and tactical opportunities. The group’s fund also owned India’s largest commercial real estate portfolio.
The expected transaction of rental assets involves ready, income producing, and under-construction properties in all prominent South India cities including Bengaluru, Chennai, and Mysore. If the deal goes as planned, then Prestige Group will utilize this money to repay all its debt and deploy remaining money to steer of growth of the company.
Through this deal, Blackstone is set to acquire 100% control of about 20 million square feet of commercial property inclusive of 16 million square feet of ready and completely leased assets. The deal is likely to include a certain portion of hospitality assets and developer’s nine operational shopping malls. The combined assets of the Prestige Group with Blackstone’s retail entity Nexus Mall will double the private equity company’s retail portfolio size.
Prestige Group through this deal looking to deleverage the balance sheet to become debt-free and use balance funds to as growth equity for the next phase of development. The company has planned to build another commercial asset portfolio of 32 million square feet over the next five years post this deal.
Overall Prestige Group’s net debt was pegged at INR 8,174 crore at the end of Q4 FY20 with a debt-equity ratio of 1.46. The company posted rental revenue of INR 1,050 crore in the FY20.
The coronavirus pandemic has hit the real estate sector hard and building pressure on companies to deleverage their assets to survive and pursue future growth. In the past also industry had witnessed multiple billion-dollar deals such as DLF-GIC investment (USD 1.9 billion) and Brookfield Asset Management-Hiranandani Group (USD 1 billion). This trend is expected to go northwards and will witness other stressed asset acquisition or large investment in the future.