Commercial real estate seeks increasing interest from PE funds

The commercial realty sector is witnessing increased interest from private equity funds , with several large institutions focusing on completed and leased commercial assets for investment. As per research from Venture Intelligence ,In the year 2015,PE real estate firms deployed more than $5 billion in Indian real estate companies and projects — the highest since the financial crisis of 2008 — through 90 deals,Large investors and established devel -opers also created several joint venture platforms in the past year, it said in a report. Of the investment made, commercial projects accounted for 10%, it said. "Most of the private equity funds that India is receiving is from sovereign funds and pension funds," said Sanjay Dutt, managing director, India, at realty consultants Cushman & Wakefield. "These funds prefer to invest in safer assets and have the potential to make long-term investments." Completed leased commercial assets are seen as the best bet for these investors. They have also been actively getting into tie-ups with builders to make investments in India.In one of such arrangements,Tata Group's real estate and infrastructure development arm, Tata Realty & Infrastructure,partnered with Standard Chartered Private Equity to create a Rs 3,000 crore investment platform. While Goldman Sachs and Bengaluru-based property developer Nitesh Estates formed a $250 million fund to invest in income producing commercial real estate assets in India, APG and Xander also launched a $300 million India office venture. Similarly, US private equity giant Blackstone formed a special purpose vehicle with Embassy Property Developers, while sovereign wealth fund Qatar Investment Authorities agreed to back real estate firm RMZ to buy commercial assets. From the REIT perspective, private equity funds that are planning to launch REITs are seeking to build a portfolio of commercial assets. "Commercial platform is extremely important as office assets cannot survive merely on leverage (borrowed) money. Equity money is extremely important to increase quality of commercial assets and long-term success of real estate investment trust," said Rajeev Bairathi, executive director of capital transactions group at Knight Frank India.

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