Shapoorji Pallonji, Allianz Group tie up for $500 million real estate fund

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Mumbai: Global insurance firm Allianz Group on Thursday announced that it has partnered with Shapoorji Pallonji Group to set up a $500 million real estate fund—SPREF II—which will invest in commercial office properties in India.

The transaction, which marks the German firm’s first investment into real estate in India, was conducted by Allianz Real Estate, a $63.5 billion real estate investment and asset management firm within the group.

This deal forms part of Allianz’s strategy to allocate around 5% of its global real estate portfolio to the Asia Pacific region, the company said in a statement.

Allianz will own 50% of the platform, with the rest held by long-term institutional investors. The fund plans to raise $500 million in equity.

“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,” said Francois Trausch, global chief executive officer (CEO), Allianz Real Estate.

The fund plans to build a “long term, cash flow producing office portfolio by acquiring a blend of develop-to-core, forward purchases, and stabilized or stabilizing assets.”

It has six target cities—Mumbai, Bengaluru, Hyderabad, Pune, Chennai and Delhi-National Capital Region.

Khaitan & Co., Ernst & Young, and Macquarie Capital Securities (India) Pvt. Ltd acted as advisors to Allianz, while JLL, AZB and PwC were advisers to Shapoorji Pallonji Group.

“We are looking to deploy approximately 60% of our Asia-Pacific allocation to growth economies. The Indian economy has been consistently outperforming,” said Rushabh Desai, Asia-Pacific chief executive officer, Allianz Real Estate.

Founded in 1865, Shapoorji Pallonji Group is engaged in construction, infrastructure and real estate businesses across the country.

The venture, supported locally by the Shapoorji Pallonji Investment Advisors team led by Rajesh Agarwal, has the potential to buy out or develop close to $ 1.5 billion worth of commercial projects across India, the company said.

“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 substantial credentials and experience in delivering and managing real estate assets across key markets in India,” said Shapoor Mistry, chairman of Shapoorji Pallonji Group.

Shapoorji Pallonji Real Estate already has a $ 250 million equity platform with IFC, a member of the World Bank Group, and Asian Development Bank to develop affordable housing projects across India.

At present, three projects with a total size of around 15,000 units, are at various stages of development. In 2015, the Mumbai-based conglomerate along with Canadian Pension Plan (CPPIB) acquired a 2.7 million sq. ft operational Information Technology park in Chennai for around $220 million.

“There has been increasing interest in Indian real estate opportunities and among international investors, pension funds and insurance companies are keen on participating in the Indian growth story,” said Shobhit Agarwal, head of capital markets at JLL India.

He said the growing demand for both office space and logistics facilities from e-ccomerce firms and the reforms laid out by the government to improve transparency in real estate have made it easier for foreign capital to enter the Indian real estate market.

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