Prestige in talks with investors in path to REIT, says offices CEO Marwaha

Group executive director Juggy Marwaha said that talks are on with a variety of investors, including funds such as Blackstone

Bengaluru-based real estate firm Prestige Estates Projects Ltd, better known as the Prestige Group, is currently in talks with a number of strategic investors, including large funds, to increase its offering in Grade-A offices, and ultimately take the vertical to a real estate investment trust (REIT), an asset class that has significantly helped real estate promoters such as Embassy Group and K Raheja Corp to monetise assets and broaden its liquidity base.

"We are talking (to potential strategic partners). Ultimately, we want a quality partner that will help us with the fuel that we need to grow, and de-risk from the perspective of putting too much of our own equity. We want a partner who will help us grow this business and ultimately take it to a REIT," said Juggy Marwaha, group executive director and CEO of Prestige's office ventures, during an interaction with Moneycontrol.

Asked about potential partners that the group is in talks with, Marwaha indicated that the discussions include private equity major Blackstone, a major player in India's commercial real estate market, having sponsored four of the five REITs currently listed. He said that Blackstone is a "natural partner" to scale up the office business.

Collaboration with Blackstone

Prestige has earlier collaborated with external investors such as Blackstone. In 2021, Prestige sold its then office and mall portfolio of 17 million square feet to Blackstone for $1.5 billion, which the fund later moved to its retail REIT (Nexus Select Trust), as well as Knowledge Realty Trust, the pure-play office REIT sponsored by Blackstone.

In the group's new, signature office project, the Prestige Lakeshore Drive, at Bellandur in Bengaluru, Prestige and Blackstone has jointly invested around Rs 2,300 crore for the first phase of the project, with a leasable area of 3 million square feet, developed on a 32-acre plot. Blackstone is also slated to set up a global capability centre (GCC) on the campus, with the first phase being readied for occupation by clients.

The Irfan Razack-led firm has also factored in the notorious traffic conditions on the Outer Ring Road (ORR), on which multiple large office campuses are located, constructing a dedicated flyover from ORR to the Lakeshore Drive project. Prestige, which has a large landholding in the area, is acquiring the upcoming metro station on the ORR as well, and will rename it the Lakeshore Drive metro station.

Such moves, of real estate developers building such projects close to metro stations, and also purposing them to serve the new projects, is becoming more prominent in major cities, such as Oberoi Realty's Skycity Mall in Borivali, or RMZ's upcoming Nexus office campus in Jogeshwari. Both of Prestige's major upcoming office projects in Mumbai, at Mahalaxmi and Bandra Kurla Complex, are slated to have metro connections.

Mass-transit options

Infrastructure developers are able to monetise part of the capital-heavy construction process through the sale of long-term naming rights and help with land and construction, while office and mall developers are also able to use the new metro connection to drive footfall through seamless connectivity. Marwaha noted that for companies to attract and retain talent, mass-transit options are now essential.

Also essential towards attracting more employees has been improving the quality and offering in terms of office campuses, especially with the advent of GCCs, contributing to the institutionalising of a segment previously dominated by individual or family landlords.

"It is all about talent...GCCs are spending around $100-$250 per square foot doing their fitouts, with capex budgets going up. They want to give their employees in India the same experience that they are giving in Boston or San Francisco or London. Not only do they want good quality infrastructure inside buildings, but they also want good quality buildings with no inherent issues such as strata-ownership or title. That is the reason why the business is highly institutionalised," Marwaha noted

In the lead-up to a potential REIT, the company is looking to significantly increase rental income as a line item on its balance sheet, by ramping up leasing in cities like Bengaluru and Mumbai, and through a $2 billion investment towards new developments over the next five years.

Marwaha noted that, in 2025 itself, the group has added around Rs 1,000 crore of annual rental income, for buildings expected to be delivered in the next two years. Rental income is expected to cross Rs 3,250 crore in the next five years, according to Prestige, with a significant annuity income also expected to help in the company's plans for a strategic partner and REIT.

"If we are going for a REIT or IPO, it (rental income growth) also helps the partner to come in at an early stage and grow with somebody like us that has the tried and tested model for execution and leasing capabilities," said Marwaha.