At a time when real estate markets across the world are reeling under the economic depression caused by the Coronavirus pandemic, Canadian giant Brookfield Asset Management has agreed to buy Bangalore-based RMZ Corp’s commercial properties for $2 billion, touted to be among the biggest real estate deals in India. Last month, the Competition Commission of India had approved the deal.
In a statement issued on October 19, 2020, the Bangalore-based real estate developer said the Canadian firm would buy 12.5 million sq ft of office and co-working spaces in Bengaluru and Chennai, across RMZ Infotech, RMZ Galleria (India), RMZ North Star Projects, RMZ Ecoworld Infrastructure and RMZ Azure projects. This accounts for 18% of RMZ’s entire commercial portfolio.
The $2-billion deal will fuel RMZ’s hyper-growth strategy of aiming to grow their real asset portfolio over the next six years. The deal also includes divestment of the group’s co-working business, CoWrks, the company said in the statement.
Chairman Manoj Menda-led RMZ Corp has a total real estate portfolio of 67 million sq ft and plans to increase it to 85 million sq ft by 2025. The builder operates its co-working spaces under the brand name CoWrks. The developer, whose commercial asset portfolio is valued at nearly $10 billion, has its presence in six mega markets of India, including Bangalore, Chennai, Hyderabad, NCR, Mumbai and Pune.
While stating that it marks the largest-ever deal in the Indian real estate industry, RMZ said it would use the capital to pay off its existing liabilities, after which it would become a debt-free entity, and expand its portfolio. The builder’s debt is estimated at Rs 12,500 crores.
“Upon divestment, RMZ is now among the only zero-debt real estate companies, globally. With this deal, we have ample headroom to achieve our next phase of growth that RMZ 2.0 has defined for us. Our massive transformative purpose, is to disrupt the way people view work, defining the future of space,” Menda said.
While the 18-year-old company has the largest presence in the Bangalore market, where it has a total of nine projects, including Ecoworld, Ecoworld Series 20, Ecoworld Series 30, Ecospace, The Millenia, Infinity, Nxt, Azure and Centennial, Hyderabad is its second biggest market, where it has projects including The Sky View, Nxity, The Vault and Spire. The builder has one project each in the NCR (Infinity) and Mumbai (Nexus) markets.
“This real estate transaction is momentous for the commercial real estate industry, in light of its large scale at the right juncture. Also, it further accentuates the strength and resilience of the commercial office business,” added Arshdeep Singh Sethi, MD, RMZ Corp.
Last month, the Canadian asset manager, which owns and operates 22 million sq ft of commercial spaces in India, filed for a $600-million initial public offering (IPO) for its real estate investment trust (REIT). With that, it will become the third company in India to list a REIT, after Embassy Office Parks and Mindspace.
Brookfield to raise Rs 4,500 crores by listing India’s third REIT
Fully sponsored by Brookfield, the USD 600-million REIT is expected to be listed between December 2020 and January 2021
September 30, 2020: A day after market watchdog SEBI (Securities and Exchange Board of India) provided relaxations to REITs (real estate investment trusts) and InvITs (infrastructure investment trusts) for preferential and institutional placement of their respective units, global asset management major Brookfield, has unveiled plans to file for a USD 600-million initial public offering (IPO) for its REIT.
Once the Canadian investment giant files the draft red herring prospectus for the IPO and receives the necessary approvals for the same, it will become the third company in India to list a REIT. Embassy Office Parks and Mindspace are the two already listed REITs in the country. While the Embassy Office Parks REIT is backed by global private equity major Blackstone, the Mindspace REIT is also backed by Blackstone along with real estate major K Raheja Corp. Unlike the other two offerings, the REIT by Brookfield is fully-sponsored by the Canadian investment major. The REIT is expected to be listed between December 2020 and January 2021.
With total assets that include premium office space of 14 million sq ft, the REIT has real estate destinations such as Mumbai, Gurgaon, Noida and Kolkata covered under its fold. Bank of America, CitiBank, Morgan Stanley and HSBC are among the 11 merchant bankers that would act as the global coordinators for the IPO issue.
REITs are entities that own and operate commercial real estate, by pooling in money from various stakeholders. Operating in the same manner as mutual funds, REITs are traded on stock exchanges. Under a wide-ranging portfolio, REITs own and operate all sorts of commercial real estate, including office spaces, warehouses, malls, hostels, hospitals, etc. These long-term investments are expected to earn much higher yield, as compared to traditional real estate. Long-term investors gain between 7% and 9% returns on their investments.
On September 29, 2020, the SEBI said REITs could raise equity capital through the institutional placement route two weeks after a previous such exercise. Earlier, a gap of six months between two institutional placements was required, under the SEBI’s norms. The market regulator has also allowed REITs and InvITs to list on stock exchanges operating in the International Financial Services Centre.