Bagmane REIT to Maintain Bengaluru Focus Amid IT Services Challenges

Bagmane Prime Office REIT Focuses on Bengaluru for Organic Growth

Despite concerns surrounding the IT services sector, Bagmane Prime Office REIT, backed by the Bagmane Group and Blackstone, is set to focus on its home turf of Bengaluru for organic growth and expansion. The REIT aims to establish an incremental presence in other markets, driven by its strategic location as a hub for global capability centers (GCCs).

Bengaluru is home to around one-third of India's GCCs, according to a report by FICCI and Anarock. These centers are strategic facilities developed by multinational companies to create new products and functions. The Outer Ring Road corridor in Bengaluru is particularly attractive, with many GCCs located along this route. The Bagmane Group has developed several key properties in this area, which will be part of the REIT.

The REIT's existing properties are all located in Bengaluru, making it an ideal market for organic growth. The Outer Ring Road market is a significant office market, with an organic growth rate of around 10 percent, higher than most markets. This is attributed to the presence of Fortune 500 companies, with more than 65 percent yet to enter India. The REIT believes that half of these companies will prefer Bengaluru due to its talent pool, providing a significant advantage.

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The REIT has a high exposure to GCCs, with around 89 percent of its portfolio comprising long-term leases. Notable tenants include Google, Amazon, Texas Instruments, Samsung, and Volvo, which have expanded their operations in Bengaluru. The REIT's portfolio is expected to reach 47 million square feet over the next few years, driven by completions in Bengaluru, Chennai, and the National Capital Region (NCR).

The Bagmane Group continues to explore expansion opportunities in other cities, including Pune, Mumbai, and Hyderabad. This will involve greenfield land development and third-party purchases to roll into the REIT.

The REIT's Rs 3,405 crore-IPO was fully subscribed on May 6, with multiple key investors participating in the anchor round. The public issue includes an offer-for-sale by Blackstone-managed funds of around Rs 1,015 crore, marking Blackstone's fifth involvement in a REIT in India.

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After the listing, Blackstone's unitholding in the REIT is expected to be around 3 percent, with plans to remain invested in the REIT for the long term. The US-based fund aims to partner with the Bagmane Group for future projects, which can be rolled into the REIT.