Blackstone buys Embassy Industrial Parks from Warburg JV for Rs 5,250 cr

The deal will be Blackstone’s second venture in warehousing after it floated a JV with Hiranandani Group.
In one of the largest logistics deals in the country in recent years, US-based private equity fund manager Blackstone Group has bought Embassy Industrial Parks from Warburg Pincus and Embassy Group. Though Blackstone did not disclose the deal value, sources in the industry pegged the transaction at an enterprise value of Rs 5,250 crore.

Embassy Industrial Parks comprises 22 million square feet of modern logistics and warehousing facilities, as well as yet-to-be-built assets, located across Bengaluru, Delhi-NCR, Hyderabad, and Pune. These are leased to leading e-commerce and retail players.

Warburg Pincus had a 70 per cent stake in the $250-million joint venture (JV) set up in 2015, while Embassy had 30 per cent.

For Blackstone, warehousing seems to be a new focus area, after it entered office properties in 2011 and then malls. Blackstone floated two REITs (real estate investment trusts) with its partners Embassy and K Raheja Corporation and listed them. It is the largest owner of offices in the country.

With the latest deal, Blackstone will have a portfolio of over 40 million sqft of developed and yet-to-be-developed assets with its partners Hiranandani and Allcargo. This is similar to what another logistics developer Indospace has.

It will be Blackstone’s second venture in warehousing. In late 2019, Blackstone formed a JV with GreenBase, a Hiranandani Group firm, to develop warehousing and logistics parks, marking its entry into the Indian warehousing and logistics sector.

The equal JV planned to invest over Rs 2,500 crore to develop around 12 million sqft of industrial and warehousing assets across the country in three to four years. So far, the JV has finished 2 million sqft of warehousing, and a similar space is under development.

Since 2010, Blackstone has acquired more than 1.2 billion sqft of logistics globally.

Tuhin Parikh, Blackstone’s head of real estate in India, said: “We are committed to growing our presence in India. For the past 16 years, we’ve been partnering local developers and governments to transform assets and businesses, and help communities prosper.” Jitu Virwani, chairman and managing director of Embassy Group, said: “We are extremely focused on consolidating our resources towards the growth of our core businesses of office and residential development and management. This transaction with Blackstone Real Estate, along with the upcoming merger with IBREL, is a strategic move in that direction.”

 The Embassy — Warburg Pincus JV was looking to monetise the business at an enterprise value of Rs 1,700-1,900 crore in an earlier round of talks with investors last year. Though talks also took place separately with two other companies — Asia-focused logistics player ESR and GLP-backed IndoSpace — they did not materialise owing to valuation differences.

Owing to rapid growth in e-commerce and the introduction of goods and services tax, several companies entered the logistics space in the past five years. While domestic companies such as Embassy and Welspun entered the space, PE funds such as Warburg Pincus also actively invested in it.

According to Colliers International, the sector has attracted interest from multiple large institutional investors, with investment inflows of Rs 27,800 crore ($3.7 billion) since 2017. Between 2017 and the first half of 2020, the sector garnered a 17 per cent share of the total PE investment in the country.

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