Bengaluru-based RMZ group sells 12.5 mn sq ft real estate assets to Brookfield for $2 billion

In India's largest realty deal, Bengaluru-based RMZ Corp on Monday said it has sold 12.5 million sq ft of real estate portfolio and co-working business to Brookfield for USD 2 billion (around Rs 14,680 crore).

On September 29, the fair trade regulator CCI had approved the proposed deal.

RMZ group will become debt-free with the closure of this transaction, which has come amid the Covid-19 pandemic.

RMZ, a privately-held realty firm and fully-owned by brothers Raj and Manoj Menda, said it has sold 12.5 million sq ft of commercial assets to a fund managed by Brookfield Asset Management for USD 2 billion.

"The deal marks the largest-ever deal in the Indian real estate industry," RMZ said in a statement.

The realty firm has sold over 18 per cent of its total portfolio of 67 million sq ft. The deal includes divestment of co-working business CoWrks.

"RMZ has decided to divest a part of our core portfolio across Bangalore and Chennai to raise USD 2 billion of fresh capital. Upon divestment, RMZ is now amongst the only zero debt real estate companies, globally," said Manoj Menda, Corporate Chairman, RMZ Corp.

"With this deal, we have ample headroom to achieve our next phase of growth that RMZ 2.0 has defined for us," he added.

RMZ said the deal will help it in growing portfolio to 85 million sq ft in the next six years from the current 67 million sq ft.

"This real estate transaction is momentous for the commercial real estate industry, in light of its large scale at the right juncture. Also, it further accentuates the unabating strength and resilience of the commercial office business," said Arshdeep Singh Sethi, managing director of RMZ Corp.

The 18-year old RMZ group said the company portfolio, including developed and under development, has assets worth USD 10 billion.

With this deal, global investment firm Brookfield will further strengthen its portfolio in Indian real estate market.

Brookfield has already filed documents with Sebi to launch the country's third Real Estate Investment Trust (REIT) public issue to raise over Rs 4,000 crore.

In 2014, Brookfield had bought six SEZs from Unitech in Gurugram, Noida and Kolkata for over Rs 3,000 crore and later in 2016 acquired Hiranandani Group's offices and retail space in Mumbai for around Rs 6,700 crore.

India's office market has been performing well in the last few years despite an overall slowdown in the real estate, driven by strong demand for prime office space on rent by corporates in top seven cities of the country.

The office segment has been able to attract huge institutional investment from global investors like Blackstone, Brookfield and GIC.

Last week, Prestige group announced that it has agreed to sell its office, retail and two hotel properties to Blackstone. The company did not disclose the size of the proposed deal, but market sources peg it at around Rs 12,000 crore.

In December, DLF promoters had sold 33.34 per cent stake in the company's rental portfolio for Rs 9,000 crore.

US-based Blackstone has invested around USD 8 billion in Indian real estate. It has sponsored the two REITs launched and listed so far in India -- Embassy Office Parks REIT and Mindspace Business Park REIT.

Blackstone has also invested in commercial projects of Bengaluru-based Salarpuria Sattva and Pune-based Panchshil Realty.

Net office space leasing stood at record 47 million sq ft in 2019, but the absorption is set to drop this year due to the coronavirus pandemic as corporates have deferred expansion plan.

Office assets have been able to generate rental yields of 7-8 per cent as compared to 2-3 per cent in housing segment.