A fund managed by asset management firm ICICI Prudential AMC has bought office space measuring 1.7 lakh square feet in Pune's Magarpatta Cybercity from IT services firm WNS Global for Rs 177 crore, and leased it back to the company for a starting rental of Rs 16 crore per year, according to people aware of the matter. Industry observers added that such sale-and-leaseback deals are unique in the real estate industry, with the prospect of long-term, healthy yields now drawing more institutional investors into the segment.
The investment was made by ICICI Prudential Office Yield Optimiser Fund, a category-II alternative investment fund, through a special purpose vehicle that it holds shares in.
According to industry sources, ICICI Prudential AMC is looking to build a portfolio of rent-yielding commercial assets, with a focus on offices. The fund is targeting a raise of around Rs 2,000 crore, with the capital raising process currently ongoing. The sources added that the fund is targeting a yield of around 9 percent from the WNS Global transaction.
Moneycontrol has reached out to WNS Global for comments, and the story will be updated once the responses are received. ICICI Prudential AMC declined to comment.
According to documents accessed by Propstack, while WNS Global sold the property at a rate of around Rs 10,300 per square foot, it leased back the property at a starting rate of Rs 77.50 per square foot per month, with a 5 percent escalation every year built in over the five-year tenure, which is locked in. WNS Global acquired the property through an entity that it had acquired previously, according to industry sources.
While sale-and-leaseback arrangements are common in sectors such as aviation, as well as to a limited extent in hospitality, such transactions have been few and far between in commercial real estate. However, developments such as publicly-traded real estate investment trusts (REITs) have brought large equity and debt players into the segment, industry sources said, due to strong leasing activity in major markets, especially from India-facing businesses, as well as global capability centres (GCCs) built by overseas majors in India.
"Through the advent of REITs, large capital sources are taking over commercial real estate and are building a portfolio of offices and other rent-yielding properties, which provides a reasonable value addition for investors due to long-term committed leases and strong yields. These transactions are precursors to the launch of REITs. Companies are also helped out by the release of capital, which can be put to various, effective uses," said an industry source.
The source added that more investors such as asset management companies are working on such sale-and-leaseback arrangements, or outright purchases. Last year, renewable energy firm Suzlon, in a deal with 360 ONE Alternates Asset Management, sold and leased back its corporate headquarters in Pune's Hadapsar. Suzlon sold the property, One Earth, for Rs 440 crore, enabling it to continue its long-term debt reduction and non-core asset monetisation plans.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
