Real estate developer RMZ Corp and CPP Investments have signed an agreement to sell one of their prime office complexes, One Paramount 1 tech park in Chennai to Singapore’s asset manager Keppel for around ₹2,100 crore, three sources said.
The cap rate on the transaction is 8.6 per cent, the highest in recent times, according to the sources. The cap rate is an indicator of the return and is arrived at by dividing the net operating income of the asset by the current market value.
Businessline had reported in December last year that the asset was on the block. The asset, RMZ Paramount is equally owned by RMZ Corp and CPP Investments (Canada Pension Plan Investment Board).
A spokesman for RMZ Corp declined to comment on the transaction while there was no response from Keppel. CPP Investments also declined to comment on what it termed as ‘market speculation.’
Media reports have said that Keppel is looking to invest more in emerging markets such as India with China still trying to rescue its property market. Last year it acquired a under-development project in Pune from Kohinoor Group.
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One Paramount
In 2021, RMZ and CPP Investments entered into a joint venture to develop 10.4 million square feet commercial office space in Chennai and Hyderabad, that would be worth over $1.5 billion once completed. RMZ Paramount is one of the assets, the others being RMZ Nexity and RMZ Spire in Hyderabad.
Located in Porur, One Paramount is built on a land area of 12.6 acres with 2.4 million square feet gross leasable area. There are three office towers with large floor plates measuring 46,400-1.28 lakh square feet.
Last year when the asset was put on the block the average monthly rent was ₹65 per square foot. It was 66 per cent leased at the time with the expectation that it would rise to over 80 per cent by the time the transaction was concluded.
The potential net operating income was ₹190 crore and as on September 30,2023 outstanding debt was ₹1100 crore, documents showed.
Some of its key tenants are Genpact, Hitachi Energy, Maersk, Nielson IQ, UPS, VMware and Wabco.
India is one of the few bright spots in the commercial office sector globally and in the Asia Pacific region specifically. Large financial institutions from Asia and sovereign wealth funds have been consistently investing in Indian income yielding assets and tying up with local developers to build more.
In 2023 foreign investors put in $3.6 billion into Indian real estate, accounting for 67 per cent of the total flows into the sector, according to Colliers. In the first quarter of 2024, inflows from foreign investors into real estate were of the order of $500 million.