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Blackstone forms joint venture with Hiranandani for logistics foray

MUMBAI: US-based private equity major Blackstone Group has entered into a 50:50 joint venture with realty developer Hiranandani Group to build, own and operate Industrial, logistics and warehousing assets across India.

This marks foray on Blackstone, one of the largest owners of warehousing spaces globally, into India’s logistics sector after emerging as the owner of the country’s largest office real estate portfolio here.

Though this venture, both the entities will be investing over Rs 2,500 crore initially to develop the 12 million sq ft industrial and warehousing assets portfolio of Hiranandani’s logistics venture GreenBase and additional assets built up coming through acquisitions of land or warehousing assets in other locations.

The platform will initially include Hiranandani GreenBase’s 267 acres in Pune, 115 acres in Chennai’s industrial suburb Orangadum, 73 acres in Nashik and around 25 acres in Durgapur, West Bengal.

ET was first to break the story about both the entities being in advanced talks for this joint venture first on October 26.

Logistics is one of the biggest asset classes for Blackstone globally as it is the largest owner of warehousing spaces. It has so far invested over $50 billion in this segment and owns 565 million sq ft of warehousing space.

In India, Blackstone has so far committed over $6.6 billion across 35 transactions. It owns over 115 million sq ft office spaces and 5.5 million sq ft retail space in the country. However, this will be the first time the global investor will be infusing funds into logistic ventures.

“There could be short-term hiccups, which happens in every economy, but we are certainly on path to become a $5 trillion economy. We have a are very bullish view on the economy in the long term. Logistics and warehousing will be one of the major beneficiaries of this growth,” said Niranjan Hiranandani, managing director, Hiranandani Group while referring to the decision of investing in logistics.

Blackstone declined to comment for the story.

Apart from the Hiranandani joint venture, Blackstone is also in advanced talks with Allcargo Logistics to pick up around 70% stake in its 9 million sq ft warehousing portfolio. The New York-headquartered global investor is expected to be investing over $150 million through both the transactions including $90 million for majority stake in Allcargo Logistics. The private equity firm is said to have invested $60 million for picking up stake in Hiranandani’s GreenBase.

The joint platform is looking to deliver industrial and warehousing assets close to 12 million sq ft, which GreenBase already has under pipeline, in the next 5-7 years. The additional asset built up coming through other acquisitions of land or warehousing assets in other locations would be another 3-5 million.

In December last year, Hiranandani Group started its new vertical to develop industrial and logistics parks across the country. Apart from its own land bank of more than 500 acres in different parts of the country reserved for this purpose, the company is looking to acquire new land parcels either directly or through partnership and joint venture model in strategic locations.

Following the implementation of the Goods & Services Tax (GST) and emergence of ecommerce, Indian logistics and warehousing sector is headed towards transformative growth. The government’s decision to accord infrastructure status to the logistics industry is allowing developers access low-cost funds for the development.

Given the fundamental shifts across the industrial and logistics sector in the past two years, coupled with increasing demand for quality space, developers are more likely to build compliant, large-sized spaces.

Blackstone and Hiranandani’s investment into this sector is strategic as well as opportunistic given the structural reforms like the Goods & Services Tax (GST), road infrastructure , Make in India initiative, which augurs very well for the industrial and logistics sector .

The implementation of the GST propelled India’s logistics and warehousing absorption to an all-time high of over 24 million sq ft in 2018, recording a growth rate of over 40% compared to 2017, showed data from CBRE South Asia that estimated the rising interest of prominent players is likely to result in the country’s warehousing stock to touch 500 million sq ft by 2030.

Source: Economic Times