Shapoorji Pallonji, Allianz announce USD 500 million equity JV, aimed at office market in India

Shapoorji Pallonji has announced a USD 500 million equity joint venture with Allianz AG of Germany, targeting the office market in India

Shapoorji Pallonji Group, on October 12, 2017, announced a USD 500 million equity joint venture (JV) with Allianz AG of Germany, which marks Allianz’s first real estate transaction in India.

The JV will establish SPREF II, a Singapore-domiciled, INR-denominated, closed-ended fund, targeting the office market in India. With this level of equity, the JV has the potential to buy out or develop close to USD 1.5 billion (assuming debt-equity of 2:1) worth of commercial projects across India.

Commenting on the deal, Jai Mavani, group executive director, Shapoorji Pallonji Group, said “It is time to be bullish on real estate again. We seem to be at the fag-end of the Real Estate (Regulation and Development Act (RERA) and the Goods and Services Tax (GST) driven adjustments. As a group, between our contracting and development arms, we are geared towards developing around 1,00,000 units of affordable homes over the next 3-4 years. This would entail investments of (equity and debt) of nearly USD three billion and is expected to generate 20,000 jobs.” Shapoor Mistry, chairman of Shapoorji Pallonji Group, added “We view this partnership with Allianz as the first step in a relationship, which will focus on creating long-term value for the investors and will be supported by Shapoorji Pallonji Group’s credentials and experience in delivering and managing real estate assets across key markets in India.”

See also: Shapoorji Pallonji Real Estate to launch six projects in FY18

The JV marks Allianz’s first real estate transaction in India and was conducted by Allianz Real Estate, the real estate investment and asset manager within the Allianz Group, on behalf of several Allianz companies. This deal forms part of Allianz’s strategy to allocate around five per cent of its global real estate portfolio to the Asia-Pacific region. Allianz will own 50% of the platform, and the remaining will be held by like-minded long-term institutional investors. The fund is targeting to raise USD 500 million in equity. The venture will be supported locally by the Shapoorji Pallonji Investment Advisors team led by Rajesh Agarwal.

Francois Trausch, Global CEO of Allianz Real Estate, noted, “India is strategic to the Allianz Group. In growth economies like China and India, real estate provides a scalable entry into the market for Allianz, in terms of investments/asset management exposure.” The platform’s strategy will be to leverage structural trends in six tier-1 cities, to build a long-term, cash flow producing office portfolio, by acquiring a blend of develop-to-core, forward purchases and stabilised or stabilising assets. The six target cities are Mumbai, Bengaluru, Hyderabad, Pune, Chennai, and the National Capital Region.

Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate, noted, “We are looking to deploy approximately 60 per cent of our Asia-Pacific allocation to growth economies. The Indian economy has been consistently outperforming. Strong secular growth, stellar demographic trends and improving transparency, are supporting stable real estate occupiers, as well as investor demand, particularly in the office sector, which is ideal for long-term core investors like Allianz.”

 

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