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Blackstone, whose overall real-estate portfolio tops out near $580 billion, started buying at scale in India in 2011. It’s now the country’s largest owner of office buildings, focusing on corporate parks and leasing more than half of its space to technology-focused clients from Cisco to Sony.
A global downturn could boost demand for Indian real estate. Thanks largely to Blackstone, there’s now an easier way in. The investor-cum-landlord led by Steve Schwarzman has played a big role in developing a local market for real estate investment trusts. Now it’s preparing to float a collection of glitzy shopping malls in what would be only the country’s fourth publicly traded Real Estate Investment Trust (REIT). It’s well-timed.
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Blackstone, whose overall real-estate portfolio tops out near $580 billion, started buying at scale in India in 2011. It’s now the country’s largest owner of office buildings, focusing on corporate parks and leasing more than half of its space to technology-focused clients from Cisco to Sony. India has bagged 47 percent of Blackstone’s $8 billion of Asia-targeted property acquisitions since 2016, per Dealogic.
The asset manager floated India’s first two REITs: in 2019 came Embassy Office Parks, Asia’s largest by area, with Mindspace Business Parks a year later. In a sign of a well-developing market, Blackstone engineered a successful sale of eight percent of its Embassy stake last week, having exited Mindspace in full in January. Brookfield Asset Management, took a third REIT public last year.
The structure has brought a bit of discipline to an often unruly market. It lets investors cash out while keeping the building’s management in place to ensure tenants remain well-served. Earlier, buildings were sold floor by floor.
The embassy’s dividend yield is 6.2 percent against 7.4 percent for the coupons on India’s 10-year bonds. But there’s capital appreciation, too: India’s office REITs delivered returns of up to 27 percent in the past year, compared with a two percent decline in the Nifty 50 Index where dividend yields average less than two percent.
Office-focused real estate trusts like Embassy might fare well even if the world tips into recession. Its leverage is low and past downturns have prompted international companies to outsource more jobs to India. Physical occupancy is steadily rising as employees go back to the workplace.
Blackstone’s shopping malls are likely to prove a similar hit. There’s a limited supply of nice ones, and rich Indians have emerged from the pandemic largely unscathed, which bodes well for premium retail rents. The Abu Dhabi Investment Authority was a buyer for some of the Embassy shares through a realty fund partner. Other global funds looking to put a good roof over their long-term investment needs will follow.