The Goldman Sachs Group has put around Rs 500 crore into an income-producing asset of the Bangalore-based Ozone Group. Goldman Sachs has made this investment into the developer’s commercial project Ozone Techno Park in Chennai, jointly through two of its NBFC arms – Goldman Sachs (India) Finance Pvt Ltd and Goldman Sachs Investments (Mauritius) Ltd. The investment has been made through a structured debt arrangement.
Located on Chennai’s Old Mahabalipuram Road, Ozone Techno Park is a ready and fully leased commercial project that houses tenants such as HCL, CTS, Rainbird Healthcare and Firstsource Solutions. The IT park is spread over 7 acres with total leasable area of nearly 1 million sq ft, across the 10-storey complex.
It’s a safe bet given that the project is fully leased to blue chip global clients and offers a steady stream of rental yield. The deal will be completed in two tranches. The company is likely to use a part of the funds raised to repay some of its debt obligations, including to Urban Infrastructure Venture Capital that has exposure to some of its other projects.
With lending by banks to real estate sector slowing down since 2011-12, the role of NBFCs and housing finance companies had gained prominence. The realty sector’s outstanding credit from these entities had tripled to $40.2 billion in 2017-18 from $13.4 billion in 2011-12. In percentage terms, the proportion of financing by NBFCs and HFCs had increased to 58% in 2017-18 from 36% in 2011-12.
The liquidity crisis that started with the default of IL&FS last year has changed the scenario completely. However, the Goldman Sachs-Ozone transaction stands out as this is for a yield-producing commercial asset and is not a private equity investment, financed instead through NBFC units.
The Ozone Group, Goldman Sachs and Urban Infrastructure Venture Capital Fund declined to comment. Large global institutional investors, including Blackstone Group, Brookfield Asset Management, Singapore’s sovereign fund GIC, Canada Pension Plan Investment Board (CPPIB), Goldman Sachs, Abu Dhabi Investment Authority and Qatar Investment Authority have already been investing aggressively in Indian real estate assets, especially the commercial segment, over the past few years.
Against the backdrop of an ongoing policy overhaul, rising investor confidence, enhanced transparency, and sustained growth in demand for grade A commercial office space, experts believe the investment momentum will continue to rise.
The commercial real estate segment has emerged as the most favourable asset class for institutional investors with a five-fold increase in capital flows to $8.2 billion between 2014 and 2018 from $1.6 billion in the preceding five-year period starting 2009