Govindraj: delivering futuristic spaces
While expanding its portfolio, RMZ, which at present has 19 rental-yielding, premium commercial office properties under its belt, has consciously decided to diversify into fast-emerging industrial/logistics and hospitality sectors. Further, the company is also expanding its footprint into offshore markets like London, Paris, New York and Dubai, where it will develop Grade A assets in partnership with local players. In fact, going ahead, 15-20 per cent of new assets will be built in the international market.
Having restricted itself to the Bengaluru market in the initial years, the company has, in the last few years, expanded its operations to other major gateway markets like Hyderabad, Chennai Mumbai, Delhi-NCR and Pune as well. Currently, Hyderabad has emerged as the largest market with 21.1 million sq ft of assets under management followed by Chennai (7.7 million sq ft), Bengaluru (7.3 million sq ft), Delhi-NCR (6.3 million sq ft), Mumbai (6.6 million sq ft) and Pune (1.9 million sq ft).
“Having built iconic offices in Bengaluru, we are now replicating our success story in other geographies where our clients/tenants want us to come up with similar kind of properties. Over the years, we have built the requisite capabilities to deliver futuristic spaces and we now want to leverage the same in a much wider canvas. We are putting all crucial elements in place in order to make our next growth phase quite eventful. Our focus will now be on creating spaces that, apart from physical aspects, will have attributes like experience, wellness and sustainability in a more holistic manner,” says Thirumal Govindraj, Sr Managing Director, Executive Board Member of RMZ Corporation.
Thirumal is at the helm of the organisation’s board & strategic planning, asset management, property management and corporate communications. His 25 years of corporate experience combined with the dynamism of RMZ has enabled the organisation to enjoy an extensive tenant portfolio that boasts of several high profile organisations, and an exponential increase in company NOI or net operating income.
“We are committed to building socially, economically, and environmentally responsible assets and communities. The company’s Massive Transformative Purpose is to imagine, create and transform for the future. Our innovative approach to developing and managing real estate invariably raises the industry’s bar for quality and sustainability. By taking a leap of faith and adapting to, and indeed embracing the digital universe, we at RMZ are driving a sustained transformation programme to deliver superior real assets with elevated member experiences,” states says Jayakumar K, Sr Managing Director, Executive Board,
Jayakumar spearheads the development and management of new assets at RMZ, right from the planning and design stages, to the procurement and project execution. He has introduced resilient design concepts to address the requirements brought on by climate change. He has also initiated a sustainable construction approach, which not only optimises energy and water consumption but also minimises construction debris generation through reuse.
While diversifying into new asset classes such as industrial, logistics and hospitality as also expanding its portfolio as a whole, the company has adopted a strategy of forming co-investment platforms and partnerships with global institutional and sovereign funds like Canada Pension Plan Investment Board (CPPIB) and Mitsui Fudosan of Japan.
The company, in the past, has also raised funds from Qatar Investment Authority (QIA) and Barings Private Equity Partners. QIA (in 2013) and Barings in 2012 had jointly invested $275 million, picking up 25 per cent and 21.6 per cent stake, respectively in the company. In 2018, the promoters bought back shares from both these global investors through a combination of internal accruals and bank financing. This was one of the biggest exits for private investors in India’s real estate sector in recent times. The deal, valued at close to $1 billion, offered around 3.5 times return to both these global investors.
Jayakumar: resilient design concepts
As a benchmark for future-ready work spaces, RMZ Ecoworld 30 integrates a 360-degree view of design, keeping human experience as the central focus, while incorporating exponential technologies, sustainable development, member experience and engaged communities. This partnership also marks a joint intent to expand into other major Indian cities such as Mumbai, Delhi NCR, and Bengaluru.
“Mitsui Fudosan is excited to embark on this promising partnership with RMZ. We hope to add value to this venture with our Japanese expertise and look forward to growing this association with RMZ Corp. We are pleased to partner with RMZ, a visionary developer with extensive experience for this integrated development, especially in a city like Bengaluru which we consider to be the digital capital of the world. This partnership is in line with Mitsui Fudosan Group’s strategy to achieve exponential growth of our global business,” says Akihiko Funaoka, Executive Managing Officer, Mitsui Fudosan Co, Ltd.
“In today’s market, a business model based on prestigious partnerships and alliances with strong, credible capital providers, is bound to garner better business results than one entity doing it all alone. Leveraging the strength of different capital flows and different product categories is diversification done right. Such a model can gainfully target organic and inorganic growth, while simultaneously focusing on differentiated product categories. Such diversification is a proven process that serves to simultaneously de-risk market plays and amplifies profitability,” says Vishal Srivastava, President , Corporate Finance, ANAROCK Capital.
“RMZ scores highly with regards to their competitive position in the industry, quality of assets, quality of management and quality of corporate governance, making them an ideal JV partner for global institutional capital,” says Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.
While RMZ 2.0 is aggressively following its hypergrowth strategy, it is also looking closely at its books. The company has not only pared its debt but also become a zero-debt entity, probably a rare case in the realty business. Towards this end, in 2020, the company sold 18 per cent or 12.8 million sq ft of its office assets to a fund managed by Canada’s Brookfield Asset Management Inc for $2 billion in one of the largest real estate deals in the country.
The transacted portfolio has assets in Bengaluru, Chennai, Pune and the group’s co-working business, CoWrks. A part of RMZ’s largest real asset, RMZ Ecoworld in Bengaluru, is at the core of the transaction. It is a 14-million sq ft office development, located on the Outer Ring Road, Bengaluru, of which 6.7 million sq ft has been acquired by Brookfield.
“The deal between RMZ Corp and Brookfield marks our most important milestone as we converted to a ‘debt-free’ firm. At RMZ, we look forward to enhancing our hypergrowth strategy. With this deal, we have ample headroom to achieve our next phase of growth,” says Manoj.
“Our deeply unifying agenda is to leverage integrated digital platforms to build smart, engaged, and quantiﬁed communities. We pioneer new sustainability, technology and well-being solutions, and shape the future of how we live, work, learn and play. We design offices that meet the needs of today’s knowledge workers,” adds Manoj who along with his elder brother Raj, was a pioneer in establishing B2B real estate solutions that heralded a new dawn in the Indian commercial real estate space.
Currently, the company has two equal partnerships with CPPIB Investments and Mitsui Fudosan, while a third 50:50 JV of equity investment worth $0.5 billion is being forged in the hospitality space where the company is currently in the process of finalising projects involving 1,200 keys.
In March this year, RMZ and CPPIB decided to form an equal JV where the latter will invest around $355 million. The joint venture formed to construct and acquire commercial office space in India’s major cities, will be seeded with StarTech – a 1.37 million sq ft office building located in Koramangala, Bengaluru, which is currently co-owned by RMZ and Prestige Estates. CPPIB will acquire Prestige’s entire stake in StarTech which is an LEED Platinum-rated green building and is a premium commercial campus with 100 per cent occupancy.
This is the second joint venture between RMZ and CPPIB, following their first joint venture formed in April 2021, when the two companies partnered and CPPIB put in around $210 million for development of about 10.4 million sq ft of commercial office space in Hyderabad and Chennai.
“These recent joint ventures will provide RMZ additional opportunities to forge new strategic financial co-investments and remain ahead of the curve whilst also significantly increasing capital allocation to the core and development asset portfolios. The two joint ventures together have been established to develop assets worth over $2.5 billion across cities. This partnership takes RMZ a step closer to our vision and growth strategy by 2032,” says Manoj.
“We continue to identify high demand for premium commercial office space in top city locations in India, such as Bengaluru. As the city grows as a destination for technology businesses and start-ups, we are working alongside market leaders, such as RMZ, to grow our portfolio to support the demand. Our overall focus remains to enhance our ability to deliver solid long-term risk-adjusted returns to CPP contributors and beneficiaries,” says Hari Krishna V, Managing Director, Real Estate - India, CPPIB.
“We are pleased to broaden our relationship with CPPIB, an organisation that shares our commitment to protecting our environment and ensuring sustainability in building and construction processes. This second joint venture builds on our existing partnership in Hyderabad and Chennai and reiterates RMZ’s strategic objective to expand the group’s asset base and development pipelines across other cities,” states Arshdeep Sethi, Sr Managing Director, Executive Board Member of RMZ.
Sethi plays a pivotal role in defining, shaping and implementing the strategic vision of the organisation. He currently spearheads the mergers & acquisitions team and has been the driving force for all joint ventures and strategic alliances at RMZ. In the past, he has facilitated the raising of over $1 billion in FDI from global investors such as the Qatar Investment Authority, Mitsui Fudosan, Barings Private Equity Partners India, AIG and Wachovia.
Earlier, in January 2020, RMZ announced a strategic, equal partnership with Mitsui Fudosan (Asia) Pte Ltd, a subsidiary of Mitsui Fudosan Co Ltd, a leading global real estate developer headquartered in Tokyo. The 50:50 joint venture of $1 billion, was forged to augment RMZ ’s Future of Space landscape concept where it creates spaces for an integrated community of tenants, clients and members who live, work, eat and play at these places. The association was Mitsui Fudosan’s maiden investment in India. The first development undertaken with this joint venture is a 3.5 million sq ft development, RMZ Ecoworld 30, located on the Outer Ring Road of Bengaluru.
RMZ, one of the few zero-debt real estate companies globally, boasts of a pipeline of 34.5 million sq ft of under-construction projects that include Ecoworld 30 & 20 (6 million sq ft) in Bengaluru; RMZ One Paramount in Chennai (5.5 million sq feet); RMZ Spire, Vault & Nexity (12 million sq ft) in Hyderabad and Nexus in Mumbai. This apart, the company also has one project each in Pune and Nagpur. Its combined construction pipeline in Maharashtra’s three locations stands at around 11 million sq ft.
Despite a large portfolio of rental-yielding office assets (around 55 million sq feet), RMZ has decided not to go for publicly-listed REIT. Instead, the company is looking for privately traded REIT. This follows the promoters buying back shares from QIA and
Barings in 2018. Earlier to this, the company was also looking to go for public REIT. “Earlier, we also had decided to go for public REIT. But as per our new zero-debt strategy, we prefer private REIT, backed by a few FIIs,” says Sethi.
RMZ has successfully navigated the pandemic era by putting together a centralised multidisciplinary taskforce to implement its own regulatory plans for its partners and members. The company’s expert management teams implemented tailor-made procedures for all its assets across the country to ensure the safety and well-being of all members, tenants, employees and partners.
With leadership in energy and environmental design, LEED and WELL certifications in place, the company is at the forefront of sustainable building design, construction and operation. Its active, smart and biophilic design creates unique experiences to enhance the health and well-being of its members.
“Around the country, we operate long-term assets and businesses. This approach dictates both our investment strategy and our commitment to environmental, social and governance (ESG) practices. We believe that value creation and sustainable development are complementary goals. Throughout our operations, we are committed to practices that have a positive impact on the communities in which we operate,” says Manoj.
Signs of recovery
Meanwhile, after a couple of years of pandemic-related disruptions, the commercial office segment is showing distinct signs of recovery. According to a Colliers report, India continues to be one of the fastest-growing economies in the world. With the receding number of Covid-19 cases, and healthy vaccination rates, domestic economic activity is reviving. While global uncertainties persist, India’s fundamentals remain strong with strong consumption expected this year led by a normal monsoon and robust private investments.
On the real estate front, the report says that Q12022 saw commercial gross office absorption at 13 million sq ft, increasing over 100 per cent YoY. Occupier demand is back in the market with large block deals in technology-led cities. On the industrial front, industrial and warehousing demand stood at 6.2 million sq ft in Q122 increasing by about 11 per cent YoY.
With economic activities picking up, institutional investment in the real estate sector during Q12022 doubled YoY to $1.1 billion. Institutional investors continue to view the country’s real estate sector favourably with foreign investors seeing a huge upside in rent-yielding assets.
With all these developments in place, RMZ is geared up to start its next growth phase in which the company, pursuing its Future Space concept, plans to take its portfolio to 85 million sq feet by 2026 and 350 million sq feet of AUM by 2032. RMZ has relentlessly pursued innovation and driven a sustained transformation programme to deliver projects better, faster and with a superior member experience. As a developer and operator, the company takes special pride in the distinctive quality, design and sustainability of its assets. RMZ has embraced social design to shape spaces to be more connected, convenient and engaging.
All these efforts have placed the company in a unique position in the market, even as it enjoys a distinct edge over its competition. RMZ’s innovative approach to develop and manage real estate has invariably raised the industry’s bar for quality and sustainability. With the divestment of 18 per cent of its portfolio for $2 billion recently, RMZ has not only become a zero-debt real estate business, but also added fresh capital to fuel its hypergrowth strategy.
An origin story
The genesis of RMZ Corporation goes back to the 1980s when Raj and Manoj Menda’s father, Arjun Menda, 89, ventured into the real estate business with the Rahejas (K Raheja Corp) and remained part of the latter’s South India business for over two decades. The Mendas have family connection with the Rahejas as Arjun Menda is married to the sister of Chandru Raheja, the chairman of K Raheja Corp.
But ever since RMZ Corp was founded in 2002, both the families have worked separately and grown in stature. Before entering into real estate, their father who has a master’s in technology from IIT Kharagpur and also went overseas for higher education, built industrial platforms across industries, worked with companies like Mahindra & Mahindra, and Gabriel India.
However, in early 2000, the Mendas decided to set up their own real estate business and that is when RMZ Corp was founded in 2002 by both the brothers who also spent a few years of their initial journey working with the Rahejas where they learnt the nuances of the business. At RMZ, their first project was The Millenia, situated beside Ulsoor lake in Bengaluru and the first client was Philips India. Currently, RMZ’s headquarters are in this building.
Now the third generation has also joined the business. Raj’s son Sidharth, a board member, is director, industrial & logistics. An alumni of Mallya Aditi International School, Bengaluru, India, with a Bachelors in Business Administration (Finance) from Bentley University, Boston, USA, he has been heading the RMZ’s industrial & logistics team for the past two years. Earlier, he had founded the co-working business, CoWrks, which was divested to Brookfield Asset Management two years ago.
Manoj’s son Mihir is also a board member and uses disruptive forces impacting financial, business and operating models to drive enterprise-wide transformation, while driving synergies and efficiencies within and between business units and aligning stakeholder interests. Mihir is an engineering undergraduate from Columbia University and is currently doing his thesis at MIT. He is the founder of Mex, an integrated tech platform and UrbanUp, India’s first sustainable social housing project, to encourage resilience from vulnerable communities through secure, sustainable homes and access to healthier environments
Both Manoj and Raj have worked relentless and today scripted a big success story in the real estate space. At RMZ, they have built a cohesive institution where founders have put in place a strong leadership team of professionals who are empowered to deliver their goals in a passionate manner.
Manoj is an active member of the World Economic Forum, WSJ CEO Council, Urban Land Institute, Young Entrepreneur Organisation, Young Presidents Organisation and Global Real Estate Institute.
Raj is the first Indian to be on the Jury of the Urban Land Institute Awards for Excellence. He is also a past member of the Urban Land Institute Global Jury. Raj was the Chairman of the FICCI Real Estate Committee for 2021-22.