Mumbai: The prominent corporate headquarters of Infrastructure Leasing & Financial Services (IL&FS), one of the earliest to come up in the bustling financial district of Bandra-Kurla in Mumbai, is on the block. Selling its headquarters is one of minor options for cash-strapped IL&FS, which has a debt of around Rs100,000 crore, to raise funds.
The circular IL&FS headquarters has attracted the interest of two bidders at least—private equity firm Blackstone group of the US and Canada-based Brookfield Asset Management, one of the largest global real estate investment firms. Both Blackstone and Brookfield are two of the largest foreign players in the real estate business in India. It appears that Blackstone is willing to pay Rs 950 crore for the building. Sometime ago, when Hari Shankaran was the managing director, IL&FS was demanding Rs1,200 crore for the property.
The reason why IL&FS has demanded a much higher price is because all the buildings in the Bandra-Kurla area now enjoy a higher floor space index—(FSI), the measure of how much floor space that can be constructed. However, this extra FSI is only on paper. Due to proximity to the airport, it is unlikely that buildings in BKC (Bandra Kurla Complex) area will be able to utilise the increased FSI and go much higher.
The sale of IL&FS headquarters would be the first publicly visible action marking the dismantling of a maddeningly complex and highly leveraged IL&FS group. Brookfield has been an aggressive acquirer of marquee assets. In April this year, it bought Equinox Business Parks, a prime commercial property also at BKC, for Rs 2,400 crore from Essar group. The 10-acre business park comprises four towers, with a leasable office space of about 1.25 million sq ft. Earlier in 2016, Brookfield bought 4.5 million sq ft commercial properties from the Hiranandanis in Powai area of Mumbai and 17 million sq ft of Unitech Corporate Parks in 2014.
Blackstone is also quite active in India. According to reports, Embassy Office Parks, a joint venture between Blackstone and Embassy group, is looking to float the public issue of its real estate investment trust (REIT) early next year. Embassy Office Parks holds a portfolio of 33 million square feet across Mumbai, Pune, Bengaluru and Noida. About 24 million sq ft of this portfolio is completed and out of this around 95 per cent is leased out.
Annual rental income of the portfolio is over Rs2,000 crore. Blackstone Real Estate has committed to $5.3 billion across 31 investments in India. Of this, $3.9 billion is in office assets; it has invested in more than 100 million sqft of office space. IL&FS has rented out several floors of its headquarters. It advertises itself to prospective clients as one of the biggest commercial buildings in BKC and is the most noticeable upon entering G Block, 300 metres away from BKC food court. Standing 10 floors high, it has a floorplate measuring 40,000sq ft.
