ICICI Prudential AMC unit sells commercial office assets to HNIs

Bengaluru: ICICI Prudential Real Estate Investments, a division of ICICI Prudential AMC Ltd, has sold four of its five commercial office investments to ultra-rich individual investors and family offices, a top company executive said.

Among them are one individual building, and several standalone office units.

With the fifth exit, expected later this year, it would have exited all its office investments, made during 2012-14 under its portfolio management scheme, Rahul Rai, head of real estate business at ICICI Prudential AMC said.

ICICI Prudential Real Estate Investments had invested around Rs450 crore across five transactions in Mumbai, Pune and Noida for a 550,000 sq. ft portfolio, which was leased to large international tenants. These exits resulted in an internal rate of return (IRR) of 10-21% on the investments, Rai said.

ICICI Prudential AMC is also currently raising its first commercial office real estate alternative investment fund (AIF) to make fresh investments in pre-leased and finished office assets.

“There is decent appetite for office investments from HNI (high net-worth individual) investors, given that expectations from the residential sector have been muted. Unlike residential, investments in completed office projects involve less risk,” Rai added.

Sanjay Puri, managing director of real estate consultancy Sure Shot Suggestions said there is a lot of demand for ‘strata sale’ in offices, which is basically sale of office units. The consultancy advised on a couple of these exit transactions in The Capital building in Mumbai’s office hub Bandra-Kurla Complex.

In 2017, ICICI Prudential Real Estate Investments launched its first commercial office AIF—the Rs750 crore ICICI Prudential Office Yield Optimiser Fund, which included a Rs250 crore green-shoe option. A green-shoe option allows a fund to raise additional money from interested investors.

Rai said the first close of the fund has been achieved but did not disclose the amount raised.

“We look forward to deploy the capital raised and will subsequently consider raising the remaining capital. Over a period of time, we expect the commercial office investment business to grow stronger. For investors, it provides an opportunity to diversify across 5-10 assets,” Rai said.

ICICI Prudential Real Estate Investments has around Rs3,700 crore of real estate assets under management, and has thus far made 63 investments and 23 exits.

Over the last few years, individual investors have largely stayed away from making fresh investments in residential projects while struggling to sell off and exit earlier investments, amid stagnant prices and tepid buyer interest.

During the same period, the commercial office segment as an asset class has fared much better, with high demand for such space and huge institutional investor interest.

“With residential investment not generating that kind of yield, there is a lot of interest among individual, smaller investors to buy office space. Because there is no access yet to REITs (real estate investment trusts), where will an individual park his money in real estate,” asked Juggy Marwaha, executive managing director at property advisory JLL India.livemint