CapitaLand India Trust (CLINT), a Singapore-based REIT, expands its presence in Hyderabad's IT hub by acquiring 2.5 million sq. ft. of office space in HITEC City. The forward purchase agreement with Phoenix Group secures prime assets in a location with strong leasing demand. CLINT's phased investment approach strategically manages cash flow while benefiting from the area's growth potential. CEO Sanjeev Dasgupta highlights the strategic value of the acquisition, building on CLINT's successful track record in Hyderabad. This move highlights Hyderabad's appeal to major investors, driven by world-class infrastructure, SEZs, a skilled workforce, and government support, ensuring continued growth and innovation in HITEC City.
CapitaLand India Trust (CLINT), a Singapore-based real estate investment trust (REIT), has announced a significant expansion in Hyderabad, India's thriving IT hub.
CLINT has entered into a forward purchase agreement with Phoenix Group, a prominent Hyderabad developer, to acquire a massive 2.5 million square feet of IT office space in the heart of HITEC City. This well-established IT corridor boasts the presence of numerous multinational companies, making it a prime location for investment. Analysts expect this strategic acquisition to translate into increased earnings and higher distributions (around USD 4.5 million in net profit) for CLINT's investors (unitholders).
The agreement utilises a forward purchase structure. Initially, CLINT will provide INR 2.15 billion (approximately USD 34.68 million) to refinance existing loans on the properties. This investment not only secures the assets for CLINT but also earns them interest at a rate exceeding their borrowing costs. Future funding will be provided as construction progresses and the buildings are leased out, with the final purchase price determined at that time. This phased approach allows CLINT to manage cash flow strategically while Phoenix Group benefits from upfront capital to complete construction.
Sanjeev Dasgupta, CEO of CLINT, emphasised the strategic value of this acquisition, stating that it allows them to secure prime assets in a location with strong leasing demand from multinational companies. The buildings' location within HITEC City further strengthens CLINT's presence in the area. They already have a successful track record in Hyderabad, with an existing portfolio of approximately 5.2 million square feet of office space experiencing high occupancy rates. This latest investment demonstrates CLINT's confidence in the city's continued growth.
This deal strengthens CLINT's existing relationship with Phoenix Group. Since 2011, CLINT has successfully acquired five buildings totaling 2.1 million square feet within its aVance Hyderabad business park through a similar forward purchase agreement. Building on this successful collaboration, the current deal includes plans to acquire two additional buildings (aVance 5 and aVance A1) within the next 18 months. This signifies CLINT's commitment to expanding its footprint in the dynamic Hyderabad market.
CLINT isn't the only major investor recognising Hyderabad's potential. Hyderabad's HITEC City, meticulously planned since 1998, has blossomed into a major IT hub, attracting tech giants like Microsoft (1999), Google (2001), Apple (2007), and Amazon (2004). Leading Indian players like Infosys, Wipro, and TCS have also set up shop, solidifying HITEC City's position. The co-working giant WeWork set up shop in HITEC City in 2018, leasing over 100,000 square feet to cater to the growing demand for flexible workspaces. This investment highlights the adaptability of HITEC City to accommodate diverse business needs.
The recent move by CapitaLand India Trust (CLINT) to acquire 2.5 million square feet of office space further highlights the area's potential. This growth can be attributed to factors like world-class infrastructure, Special Economic Zones (SEZs) offering tax benefits, a skilled workforce, and strong government support. As WeWork's 2018 investment (over 100,000 sq. ft leased) demonstrates, HITEC City is adapting to accommodate diverse business needs. With its commitment to innovation and a thriving ecosystem, HITEC City is well-positioned to remain a magnet for investment and a key player in India's technological revolution for years to come.
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