Commonwealth _ PropShare Capital, a registered Category II Alternative Investment Fund (AIF) manager under the regulations of the Securities and Exchange Board of India (SEBI), has unveiled its latest offering – the PropShare Real Estate Fund II (PREF II). This fund represents the second scheme within their existing Category II Alternative Investment Fund (AIF) portfolio, building upon the success of their first commercial office fund, PREF I. PREF II maintains a similar focus, with its core objective being to exclusively invest in completed Class A commercial real estate properties. These properties are strategically chosen for their income-generating potential, often tenanted by multinational corporations and blue-chip companies. This initiative is centered on the vibrant tech hubs of India, where there is a growing demand for high-quality commercial spaces. The fund aims to raise Rs. 500 crores, with an additional Rs. 200 crore green shoe option, allowing for potential further investment.
Kunal Moktan, the CEO and co-founder of PropShare Capital, emphasized the current economic landscape as a driving force behind their latest venture. He noted, “The current high inflation and interest rate environment has increased yields on all asset classes including commercial real estate. Since yields are inversely proportional to asset prices, this has led to high-quality Class A offices being available at distressed prices. Developers are under pressure as high interest-bearing debt used to purchase land or fund construction is putting severe pressure on cash flows, forcing them to raise capital by monetizing assets. Given the softness in the investing environment and lack of capital providers, only the highest quality assets are currently tradable. This has opened a unique one-time window for opportunistic investors to acquire quality Class A assets at above-market yields.”
The fund primarily targets institutional investors, High Net Worth Individuals (HNIs), family offices, as well as select domestic and Non-Resident Indian (NRI) investors who have a more sophisticated understanding of the market. To align with AIF regulations, the minimum investment requirement for this fund is Rs. 1 crore, making it accessible to a specific category of investors. PropShare Capital’s existing investor base encompasses a diverse mix of participants, including institutional investors, family offices, HNIs, ultra HNIs, and individuals occupying senior and middle management roles in large tech, financial services, and consultancy companies. The investor pool also includes tech startup founders.
In a broader context, the introduction of PropShare Real Estate Fund II (PREF II) reflects a strategic move by PropShare Capital to tap into the emerging opportunities presented by the current market dynamics. The interplay of rising inflation and interest rates has influenced the yields across various asset classes, including commercial real estate. In simple terms, higher inflation and interest rates have led to increased returns on investments in asset classes, where the yields are inversely proportional to the asset prices. This unique scenario has created a situation where high-quality Class A office spaces have become available at comparatively reduced prices, presenting an attractive proposition for investors seeking quality assets.
PropShare Capital’s PREF II represents a strategic response to the current economic and market conditions. It seizes the opportunity presented by the unique convergence of high inflation and interest rates, enabling investors to acquire quality Class A assets at yields that surpass the prevailing market rates. This approach, combined with PropShare Capital’s experience and expertise, positions PREF II as a vehicle for investors to capitalize on the favorable dynamics in India’s commercial real estate sector.
