US PE firm Golden State Capital to invest $1 bn in Indian realty

United States-based private equity firm Golden State Capital (GSC), has decided to invest close to $1 billion in India over the next three years through its real estate investment trust (REIT). It also expects to get its REIT listed on the Singapore stock exchange next year, reports Business Standard.

"Together with our investors, we are looking for stabilised office assets that are FDI (foreign direct investment) compliant. We will have an appetite of close to $1 billion in the next three years, if we get opportunities at appropriate valuations," GSC chairman Sumit Nanda told the newspaper in an interview.

The firm is looking at a REIT listing of above $500 million. "We are already evaluating some deals. We have identified our partners, consultants and investors… looking at assets built and leased in the last two to four years in a very competitive environment, besides stabilised assets with blue-chip tenants. Under the REIT, we are targeting opportunities that are fully leased out or have certainty to be leased out soon," Nanda said.

He also said GSC was bullish on the long-term potential of these assets, as the cost of construction in India had been rising rapidly due to inflation. "We see REIT as a good platform to acquire high-quality office assets in cities like Gurgaon, Noida, Bangalore, Pune, Chennai, Mumbai and Hyderabad. Our investors would look forward to stabilised returns and a robust diversified portfolio."

REIT is a vehicle that invests in real estate assets to generate income, which is passed on to investors. Like stocks, REITs are listed and traded on stock exchanges.

GSC recently launched Burman GSC, its real estate joint venture with the Burman family, the promoters of the Dabur group. Nanda did not give details of the joint venture. "We are working on our strategy; the details would be shared in the coming months," he said.

Started in 2000, GSC focuses on the US and Indian markets, with operational offices in these two countries and Singapore. It had first entered the Indian market in 2002, when it started construction of leased assets in India by reconverting industrial buildings. In 2008, it entered into a joint venture with Ascendas (through a special-purpose vehicle) to develop a 62-acre IT SEZ (special economic zone) in Gurgaon, according to information available on its website.

Asked why GSC was re-entering India at a time the realty sector was facing a slowdown, Nanda said, "We believe in the economy's long-term potential. Yes, there are challenges in the short term, but we believe the economy will see a turnaround soon."

There could be volatility in the short run, but the company is expecting "emergence of a new chapter in the India growth story" over a three-quarter horizon. According to Nanda, the country presents great opportunities for long-term investors and real estate has been a preferred sector.