PRE-FEASIBILITY STUDY FOR TAMIL NADU

Transcription

1 TAMIL NADU INFRASTRUCTURE FUND MANAGEMENT CORPORATION PRE-FEASIBILITY STUDY FOR TAMIL NADU COMMERCE, HUB Located on Anna Salai, Chennai FINAL REPORT APRIL 2018 Internal Ref: 2018_MAR_ADV_CHE_27

2 A. PROJECT INTRODUCTION 1 The Tamil Nadu Infrastructure Fund Management Corporation Ltd [TNIFMC], (hereinafter referred to as the client) is an asset management company formed under the Tamil Nadu Infrastructure Development Board (TNIDB). Under the vision 2023 of GoTN and decongestion of residential areas in Chennai city - An iconic, modern commercial office space development christened Tamil Nadu Commerce Hub (hereinafter referred to as the subject development) has been envisaged to accommodate public and private sector entities. The same is proposed to be developed on two land parcels along Anna Salai: Land Parcel 1 (Subject Property 1) Comprises for 2 non-contiguous land parcels located on either side of Anna Salai, Nandanam admeasuring approx acres Land Parcel 2 (Subject Property 2) Comprises for 1 contagious parcel located of Anna Salai, Teynampet admeasuring approx. 1.4 acres In this context, the Client has appointed CBRE to advice on the Pre-Feasibility Study for the envisaged development with a view to opine on the optimal product mix, potential demand of commercial development and devise development strategies for the same.

3 B. KEY OBJECTIVES 2 The key objectives for the envisaged development (Tamil Nadu Commerce Hub) are:

4 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 3 Contents A. PROJECT INTRODUCTION...1 B. KEY OBJECTIVES...2 Module 1: Chennai Overview...4 Module 2: Region and Site Assessment...10 Module 3: Commercial Office Market Assessment...23 Module 4: Case Studies Iconic Commercial Office Developments...46 Module 5: Opportunity Assessment CBD and Off CBD zones...51 Module 6: Demand Assessment...53 Module 7: Product Mix Recommendations...57 Module 8: Development Option Formats...64 Module 9: SWOT & Conclusion...65

5 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 4 Module 1: Chennai Overview A. Brief overview of Chennai City Chennai, the capital of the state of Tamil Nadu is located along the eastern sea coast in the south of India. As per census 2011, Chennai houses a population of 8.65 million and is the fourth largest urban agglomeration in the country in terms of population. The Chennai Metropolitan area spans 8,989 sq.km covering the districts of Chennai, Kancheepuram, Thiruvallur and parts of Vellore district. The development in the Chennai Metropolitan area is regulated by the Chennai Metropolitan Development Authority (CMDA). Location of Chennai with context to India Figure 1 Source: CBRE Research As per the budget of , the state has witnessed moderate growth and the GSDP growth rate at constant prices in is estimated to be 8.03%. It is also anticipated that the economy will grow faster and thereby enabling the State to reach 9% growth rate in Chennai, in the year was a key contributor to the nation s GDP, contributing approx. USD 66 billion. The economic base of the city is primarily constituted by Automobile Manufacturing, IT/ITeS enabled services and Banking & Finance sectors. The city boasts of a designated IT/ITeS corridor called the Rajiv Gandhi Salai, which is a 25-km long corridor located in the south of the city which was an initiative by the Government of Tamil Nadu to attract large scale IT investments in to the city and also create an eco-system for the sector. The city is home to approx. 1million IT/ITeS Professionals professionals, working in over 4,200 companies. 1 1 Estimated by CBRE Research as an extrapolation of commercial office space activity in the market

6 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 5 The city is also known as Detroit of India owing to the presence of a robust automobile sector. The city also witnesses the presence of prominent automobile companies such as Nissan, Hyundai, Ashok Leyland, TVS, Royal Enfield etc. Chennai has a strong workforce across the cross section of industries which is a reflection of the robust education infrastructure present in the city coupled by the prevailing industry eco-system. As per census 2011, the literacy rate of the city is 90.18%, which is the second highest in the country. The city witnesses the presence of more than 170 engineering colleges with an annual intake of approx. 53,000 students. A few reputed colleges in the city are Indian Institute of Madras, College of Engineering, Madras Institute of Technology, SRM University. Chennai is considered as a robust regional economy with healthy diversification in the Secondary and Tertiary sectors viz. Industrial and IT/ ITeS Key economic drivers for development/ real estate activity B. Spatial Spread of Chennai City The city is segregated into 5 zones namely North, East, South, West and Central for the purpose of understanding the spatial spread of activity: Central ~ Key micro markets in this zone are Nungambakkam, Egmore, Gopalapuram, Royapettah, Nandanam, Teynampet. Central region is an established residential and commercial zone. The zone is primarily characterized by commercial and retail activity. The densely developed vector witness s challenges for large scale development considering limited availability of land parcels North: Key micro markets in this zone include Perambur, Royapuram, Kolathur, Madhavaram, etc. In the recent past this location has witnessed a spurt in residential activity on the backdrop of competitive land pricing and improving infrastructure. Further, it is characterized by mid to high-end under construction residential developments. Key Vectors Spatial Spread Figure 2 Source: CBRE Research West ~ Key micro markets in this zone include Anna Nagar, Porur, Ambattur, Oragadam. This region witnesses the presence of mid to high-end residential developments concentrated around Porur and Anna Nagar regions which are located in proximity to the central regions of the city.

7 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 6 Regions located further away like Oragadam, Sriperumbudur, etc. are key industrial/logistics hub of the city primarily catering to the automobile and manufacturing industries. East ~ Key micro markets in this zone include Alwarpet, Santhome, MRC Nagar, etc. Considering the premium-ness of the location owing to the proximity to sea and the CBD areas, the region has evolved into a luxury/ high end residential vector; Additionally, the region witnesses fair amount of commercial and support retail activity South ~ Key micro markets in this zone are Adyar, Velachery, Taramani, Shollingnallur, Semmancheri. Both Rajiv Gandhi Salai (designated IT/ITeS corridor) and the Grand Southern Trunk (GST) Road, have been key vectors and contribute to majority share of supply and absorption from a residential and commercial front. Peripheral markets in this region is further characterized by the availability of large land parcels. C. Chennai - Connectivity The city is well connected across the globe via air, rail, road and sea. Chennai city enjoys the strategic locational advantage of being well connected via all modes of transportation thereby positioning itself as an attractive investment destination. Furthermore, below is a broad overview of air, rail, road and sea connectivity of Chennai. Air Connectivity: Chennai International Airport is located along GST in the South-Western part of the city with recorded passenger traffic of approx million passengers during (Ranked 4th in terms of passenger Key Intra City Connectivity Hubs traffic). The airport is the third busiest airport in India in terms of international passengers. Further, there is a proposed terminal expansion and passenger traffic is expected to reach 35 million by In addition to the above, the government is evaluating development of a greenfield airport. Rail: The city has a robust rail network with two intercity railway terminals viz. Chennai Central which act as a hub for trains travelling to Western and Northern India and Chennai Egmore which connects the city to the Southen parts of Tamil Nadu and Kerala. Figure 3 Source: CBRE Research

8 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 7 Approx. 550,000 passengers use these terminals on a daily basis. Road: Four major national highways traverse through Chennai, connecting it with other major cities both within and outside Tamil Nadu. o NH 716 connects Chennai with Kadappa in Andhra Pradesh. Traverses through Tiruvallu, Tiruttani in Tamil Nadu and Renigunta in Andhra Pradesh o NH 16 forms a part of the golden quadrilateral and connects the city to Kolkata. Traverses through 4 states viz. Tamil Nadu, Andhra Pradesh, Odisha and West Bengal o NH 48 connects Chennai with Bengaluru ~ a prominent economic destination in South India. o NH 32 also called as GST road runs along the spine of the state, connecting prominent cities of the state viz. Tindivanam, Trichy, Madurai etc. Sea: Chennai is well connected to south east Asia, countries in Africa and middle-east via sea. Chennai houses 3 ports namely Chennai Port, Kamarajar Port and Adani Kattupalli Port. D. Intra-City Connectivity / Key Physical Infrastructure Initiatives Strong road and rail network have ensured excellent connectivity to key activity hubs in the city. Rail network comprising of MRTS and Suburban rail ensure seamless connectivity from major residential pockets to economic hubs. Development activity in Chennai is mostly radial although it is a coastal city. Therefore, infrastructure initiatives like the inner ring road, outer ring road and the peripheral ring road along multiple circumference layers of the city provide good connectivity to various nodes. Below is a broad level outline of the existing and proposed infrastructure initiatives in the city: Suburban Rail: Three lines each traversing through the north, south and west of the city have ensured smooth connectivity across key economic hubs in the city, connecting micro-markets in the CBD such as Egmore, Nungambakkam, Saidapet to peripheral markets of Tambaram, Villivakkam, Avadi etc. The suburban rail plys over 550 services on a daily basis and more than 1.46 million people use the suburban rail network. Thus, the existing suburban rail network shall ensure good connectivity of the subject properties to peripheral locations of the city where there is presence of significant residential activity

9 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 8 Mass Rapid Transit System: State owned railway netwok covering a distance of approx. 19 km and traversing through 17 stations along the eastern pheriphery of the city Road Infrastructure & Suburban Rail o Phase 1 & 2A connecting Chennai Beach in the north and Velachery in the south is currently operational. o Phase 2B which is an extension from Velachery to St. Thomas Mount is currently under construction and is expected to be completed by 2018 Chennai Metro: Being developed in two phases by the Chennai Figure 4 Source: CBRE Research Metro Rail Limited (CMRL) a joint venture of the Govt. of Tamil Nadu and the Govt. of India. Line 1: Also known as the green line starts at St. Thomas Mount and ends at Central Station spanning a distance of 22 kms. Currently this line is partially operational from Nehru Park till St. Thomas Mount. The remaining stretch between Nehru Park and Central Station is expected to be completed by mid 2018 Line 2: The Blue line & its extension starts from Chennai airport in the south west and ends at WIMCO nagar in the north and spans a distance of 32 kms. Currently The stretch from airport to Saidapet is currently operational. The remaining stretches of the blue corridor is expected to be completed by end of This line would bear a direct impact in boosting the connectivity to both the subject properties and thereby improve investment prospects in the central areas of the city. Further, SP 1 and SP 2 are located at a distance of ~800m and 100m respectively from the proposed Nandanam metro station. Line 3: Currently under initial stage of planning. This line is expected to connect Madhavaram in the North and Siruseri in the south covering a distance of approx. 45 kms.

10 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 9 Line 4: Currently under initial stage of planning. The line spanning a distance of approx. 17 kms is expected to connect Koyambedu in the west and Lighhouse in the east bisecting the city horizontally. Line 5: Currently under initial stages of planning. This line is expected to run along the eastern pheriphery of the city from Madhavaram in the north till Shollinganallur in the south covering a distance of approx. 44 kms Inner Ring Road: This key transport corridor located within the city, acts as a decongester of traffic along a 25 km stretch which includes key micro-markets such as Thiruvanmiyur, Velachery, Guindy, Koyambedu, Anna Nagar, Padi and Madhavaram Outer Ring Road: A 62.3 km stretch running along the external parts of the city. Phase 1 connects Vandalur micro market on NH 32 till Nemilichery via Nazarethpettai and running along micromarkets of Perungalathur, Thirumazhaisai, Pattabhiram etc. Phase 2 connects Nemilichery with Nallur on NH 716. Currently Phase 1 is fully completed and operationnal, Phase 2 is partially operational and is expected to be completed by 2018 end Peripheral Ring Road: A proposed radial road covering 162 kms connecting Poonjeri in the South with Kaatupalli in the North. The road is designed to cut across the National Highway in the pheriphery of the city. With robust connectivity via all modes of transportation and excellent intra city physical infrastructure availability, Chennai is considered to offer one of the best infrastructure quality in South India; Further, both the subject properties are extremely well positioned to benefit from the mega infrastructure initiative of metro connectivity, suburban rail and road accessibility.

11 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 10 Module 2: Region and Site Assessment A. Region Assessment The subject properties are located on one of the most prominent arterial roads of the city. This module is aimed to provide a comprehensive profiling of the Anna Salai region and its immediate surrounding in order to understand the inherent challenges and opportunities. Anna Salai which is a 12 km stretch. The corridor has evolved into a mixed-use activity hub, however has similar / comparable characteristics of development activity. Therefore, the stretch starting from Thousand Lights to Saidapet has been profiled as a part of this module with a view to identify key drivers in the market. 1. Overview of Anna Salai: Anna Salai originates at Fort St. George and runs up till Kathipara Junction, post which it splits into two roads viz. Mount Poonamalle Road and Grand Southern Trunk Road. Key micro markets along the corridor include Teynampet, Nandanam, Saidapet etc. Further, the neighboring micro-markets to the subject region are Egmore, Mylapore, Nungambakkam, T. Nagar, Alwarpet etc. which are premium in nature is typically characterized by residential/ commercial Zone Profiling of Anna Salai developments. 2. Zone Profiling: The subject properties are located along Anna Salai in the Nandanam micro market. By virtue of being located on Anna Salai, the micro market enjoys excellent connectivity to various parts of city. The subject region is characterized by the limited availability of large sized developable land parcels. Figure 5 Source: CBRE Research

12 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Mapping of key developments: Development activity in the corridor has been classified under the heads of commercial office spaces, retail mall developments, hospitality developments and independent office building by corporates/ business houses. Mapping of Key Developments in the Zone Source: CBRE Research Figure 6

13 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 12 The subject corridor viz. Anna Salai owing to its location attributes of being in the city of the city with excellent connectivity and accessibility has evolved into one of the coveted and busy real estate corridors in the city witnessing commercial and retail activity. Commercial office space activity Majority of development activity in the corridor is characterized by commercial office space developments. A fair share of developments in the region are old, and hence are categorized as Grade B developments. However, new supply additions in the market are typically Grade A developments. A few investment grade developments in the vicinity of the subject property are Prestige Palladium, Prestige Polygon, etc. A premium image is associated with the micro market considering visibility, connectivity and accessibility of the region. Additionally, the region also witnesses the presence of a few individual campuses/office developments of large corporates viz. MRF, TVS, Balmer & Lawrie, Sundaram Group, etc. Retail office space activity - Spencer plaza on Anna Salai marked the development of organized retail mall activity in the city in early 2000s; Currently the location witness s presence of another retail mall development viz. Express Avenue Mall. Additionally, the lower floors of commercial office developments are used as a h street retail area catering to banks, auto showrooms, food and beverage, etc. Hospitality activity - Anna Salai contributes to to approx. 20% of hospitality in the city catering to both business and leisure segment travelers. Anna Salai is home to national and international hotel brands in the city viz. viz. ITC Grand Chola, Park Hyatt, Hyatt Regency etc. Residential real estate activity - The region is densely populated and is mostly characterized by independent dwelling units located in the central part of the city. Further, there is also a considerable supply of unorganized residential apartments in the region. A few under construction residential developments in the region are Olympia Goodwood Residences, Casa Grande Monte Carlo, etc. Over time, this region has established into a self-sustained economic hub with presence of evolved real estate activities across segments.

14 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Physical infrastructure initiatives: The subject region, being centrally located and along one of the key transportation corridors (Anna Salai) enjoys good connectivity with different parts of the city via road. The subject region is located approx. 3 4 kms from Guindy (nearest commercial office market), approx. 6 7 kms from Taramani (key commercial office market), approx. 8 9 kms from Chennai Port, approx km from Chennai Central Station and approx km from Chennai Airport. Metro Connectivity The subject properties are located along the underground stretch of Corridor 1 of the metro corridor (on Anna Salai), with the Nandanam Metro Station situated within the subject region. Further, SP1 which offers large scale development activity is located at ~800 m from the metro station. Considering the same, it would be critical to establish easy access and commute to the metro station. SP 2 is located opposite the metro station on the other side of the road. Currently, the stations in this line are at different stages of completion and metro services are yet to become operational. However, it is expected that stretch from Saidapet Metro Station to the AG DMS Station will get operational by mid Further, the stretch from AG-DMS heading via Thousand Lights and LIC are expected to get operational by end of Figure 7 Source: CBRE Research

15 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 14 B. Site Assessment This section provides a detailed understanding of the subject land parcels and the various attributes it possesses that determine the development potential at the subject site. A detailed overview of the subject land parcels has been enumerated below: Land parcel 1 (9.65 acres): 2 Parameter Detail CBRE Comments Area Contiguity & Shape Current Usage Access Roads 9.65 acres (North side parcel: 8.15 acres 3, South side parcel: 1.50 acres) Two non-contiguous land parcels located on either sides of Anna Salai North side land parcel is irregular in shape and cut across by multiple roads. However, based on client inputs, we understand that certain adjustments to the exisiting roads will be made to derive a large continuous developable area. Additionally, the secondary access for the SP of the North side land, further divides the land parcel into smaller chunk of <1acre South side land parcel is fairly regular in shape The North side land parcel currently houses Periyar EVR building, HIG apartments, TNHB staff quarters, TNHB land (with built up structure for varied use). The South side land parcel currenty houses the TNHB head office The primary access for the subject properties is via Anna Salai. The North side land parcel enjoys a secondary access via Model Hutment Road (situated off Anna Salai) Fairly large sized land parcel located on Anna Salai; There is limited avalability of similar sized developable land parcels in the CBD region Non contiguous nature would help us develop a distingished product mix where there would be an opportunity to segregate / zone / asset classes based on proposed best use on each of the sites, however still function as a single unit We understand that applicable compensations will be made to existing occupiers; However, we feel that it is a great opportunity to house key government departments in the proposed development Excellent connectivity and accessibility from one of the key arterial roads of the city; Additional roads provide opportunity in ease of 2 Based on discussions with the client, we understand that the current land would be realigned and the new land layout as provided has been used for this study 3 Inclusive of proposed roads

16 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 15 Parameter Detail CBRE Comments operations for a large scale development Frontage Metro Connectivity Development Potential 4 North side land has a frontage of approx. 400 ft and for South side land has a frontage of approx. 200 ft SP is located at a distance of ~800 m from the proposed Nandanam Metro Station Site 1 - North Particulars Scenario 1 Scenario 2 Scenario 3 Ground Coverage 30% 30-40% 40-50% Total land area (acres) Proposed road 1 (acres) Proposed road 2 (acres) Balance net extent (acres) FSI applicable Built-up Area (sft) (FSI x Balance net extent) 684, , ,985 Site 1 - South Post the proposed consolidation of the site, the North side land parcel will enjoy signigicant frontage on three sides The South side land parcel enjoys considerable frontage along Anna Salai Considering, the possible large scale development on the subject property, it would be critical to provide seamless connectivity to the metro station so that the proposed development can directly benefit Adequate road width and frontage would aid in accomplishment of maximum permissible FSI at a 30% ground coverage. The land parcels would also be eligible for a premium FSI of 40% (if required) 4 As per Development control regulations illustrated in Second master plan for Chennai Metropolitan Area, 2026 and Client Inputs 5 A premium FSI of 40% of the current achievable FSI could also be purchased from CMDA to increase development potential 6 If the subject property is developed as an IT/ITeS development, the site extent is not less than 2,000 sqm and conforms to the other regulations, the FSI shall be allowed at 1.5 times the ordinarily permissible FSI

17 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 16 Parameter Detail CBRE Comments Height Restrictions 7 Total land area (acres) Ground Coverage 30% 30-40% 40-50% FSI applicable Built-up Area (sft) (FSI x Balance net extent) Total Built-up Area (base case) Achievable Premium FSI (40% of existing FSI) 163, , , mn 0.8 mn sft Total Built-up Area 0.9 mn 1.1 mn sft with Premium FSI The height of the development can exceed 60 meters when the abutting road is wider than 30.5 meters Anna Salai is 34 m Further, these land parcels area part of the J16 Grid of the Color coded zoning map of Chennai, AAI 8 NOC required from AAI if the development height exceeds 55 meters; maximum permissible height is approx. 123 meters NA 7 As per Development control regulations illustrated in Second master plan for Chennai Metropolitan Area, 2026 and Client Inputs 8 AAI Website

18 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 17 Property Map: Site acres Source: CBRE Research Figure 8 Property Layout: Existing land utilization Proposed land utilization Figure 9 Figure 10 Source: The Client Source: The Client

19 On-ground photographs of the property: FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 18

20 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 19 Land parcel 2 (1.82 acres): Parameter Detail Area Contiguity & Shape Current Usage Accsess Frontage Metro Connectivity Development Potential 1.82 acres Contiguous land parcel located on north side of Anna Salai Fairly regular in shape Currently a portion of the land is housing the office of Tamil Nadu Urban Finance and Infrastructure Development Corporation Ltd (TUFIDCO) and the remaining land is currently vacant The primary access for the subject land parcel is via Anna Salai The land parcel has an approx. frontage of 200 ft on Anna Salai SP is located at a distance of 100 m from the proposed metro station Site 2 Particulars Scenario 1 Scenario 2 Scenario 3 Ground Coverage 30% 30-40% 40-50% Empty land (acre) TUFIDCO building area (acre) Total land area (acres) FSI applicable Total built-up area (Base case) mn sft Premium FSI Applicable Total Built-up Area with Premium FSI mn sft Adequate road width and frontage would aid in accomplishment of maximum permissible FSI at a 30% ground coverage. The land parcel would also be eligible for a premium FSI of 40% (if required) 9 A premium FSI of 40% of the current achievable FSI could also be purchased from CMDA to increase development potential 10 If the subject property is developed as an IT/ITeS development, the site extent is not less than 2,000 sqm and conforms to the other regulations, the FSI shall be allowed at 1.5 times the ordinarily permissible FSI

21 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 20 Height Restrictions 11 The height of the development can exceed 60 meters when the abutting road is wider than 30.5 meters Anna Salai is 34 meters wide Further, these land parcels area part of the J16 Grid of the Color coded zoning map of Chennai, AAI 12 NOC required from AAI if the development height exceeds 55 meters; maximum permissible height is approx. 129 meters Similar observations to that of Subject Property 1 can be summarized for the above described land parcel as well. Further, there would be an opputunity to distinguish and introduce diffrentiated product in the market if both the land parcels are conceived as a single concept being introduced in the market. Property Map: Site 2 Source: CBRE Research Figure As per Development control regulations illustrated in Second master plan for Chennai Metropolitan Area, 2026 and Client Inputs 12 AAI Website

22 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 21 Property Layout: Proposed Use Figure 12 Source: The Client

23 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 22 On-ground photographs of the property: Both the properties under discussion, located on Anna Salai development activity hub in the Central Business District of the city provide excellent opportunities in terms of connectivity, accessibility, scale and the advantage of prevailing self sust ained real estate eco-system in the region Metro connectivity considered as critical DEVELOPMENT TRIGGER

24 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 23 Module 3: Commercial Office Market Assessment A. India Commercial Office Market Overview Commercial office space market continues to be the bright spot for the real estate sector in the country. Steady lease rentals, high absorption levels and global investor interest continue to bring life into India s commercial real estate sector. The traditional demand driver the IT/ ITeS sector continues to maintain dominance across cities over the last 5 years followed by steady demand from Banking, Financial Services and Insurance (BFSI) and Engineering & Manufacturing, Research, consulting & analytics, Co- Working / Business centers, etc. Space take up comprised of both expansion and new lettings; driven by domestic and India Level Split of Commercial office activity Graph 1 Source: CBRE Research US based occupiers, largely for their back-office operations. The total commercial office space stock in India is contributed to by 9 major cities. The year 2017 was landmark year for commercial real estate in India; by the end of the year, gross leasing activity crossed the 40 million sft mark and reached about 42.3 million sft. Bangalore and Delhi NCR remained the most attractive markets, accounting for more than half of the overall space take-up. Bengaluru, Mumbai, NCR and Chennai contribute to 75% of the office space supply in the country. Hyderabad is evolving as a hot office space market witnessing spike in space uptake over the last 1 year. B. Chennai Commercial Office Market Overview Chennai is the 4 th largest commercial office space market in India with a cumulative supply of approx. 63 million sft. Further, the total occupied stock is approx million with a vacancy of 13%. Growth in the IT/ ITeS sector post the 2000 s coupled with inherent regional dynamics have transformed Chennai into a prominent investment destination for multinational corporates Chennai Snapshot 13 Cumulative stock (mn sft) Occupied stock (mn sft) Current Vacancy Growth in Stock ( ) Development Pipeline (till 2020) Table % 4. 00% 15 mn sft and industrial groups. Chennai office space market is primarily driven by the IT/ ITeS sector operating through the spectrum of IT/ ITeS activity viz. BPO/ KPO/ Software development and Research Activities. BPO / KPO operations however are the largest functions based out of Chennai. Further, considering the 13 Source: CBRE Research

25 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 24 diversified economic base of Chennai, key non-it tenant sectors of BFSI, engineering & manufacturing, research & consulting, etc. also have small to medium scale operations. The evolution of organized office space activity in the city traditionally commenced in the CBD region in the micro markets of Nungambakkam, RK Salai, etc. Office space buildings in the CBD region primarily catered to non-it tenants viz. front offices of industrial corporates, corporate offices of business houses and BFSI segments. Inauguration of TIDEL Park in the Pre 2000 s and establishment of Rajiv Gandhi Salai (OMR) as the designated IT corridor of the city marked the onset of IT/ ITeS activity in the city. Onset of large scale commercial office space activity commenced with the development of OMR which was planned as IT investment destination around the same time where India was emerging as a global outsourcing destination. Several large-scale IT Parks, Software Tech Parks, SEZ etc. got developed in the OMR and other markets in the Secondary Business District during Chennai emerged as one of the key office space markets in India. Chennai after Bangalore was considered as a preferred office space destination in South India for Global outsourcing companies. Key developments that were completed during these years include Ascendas IT Park, RMZ Millenia, Mahindra World City SEZ, DLF Tech Park, etc. Further, during this phase, pro-active measures were taken by the Tamil Nadu government by development of IT Parks/ SEZs (land allotments to TCS, CTS, Wipro, Syntel, Polaris, etc.) along with policy level benefits offering additional FSI for development of IT/ ITeS buildings. Supply and Absorption Trends 2013 to 2017 Source: CBRE Research Graph 2 The supply-demand trends of commercial office space activity in Chennai has witnessed a steady phase primarily controlled by the supply additions introduced into the market and vacancy levels at various intervals.

26 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 25 Chennai witnessed an average annual absorption of approx million sft with relatively lower levels of activity on the supply side - approx million sft for the past 5 years. Majority of the stock that has been introduced from 2013 to 2017 are later phases of large developments / SEZ s set up in prior years. Therefore, a decline in the supply trend has been witnessed in the last few years thereby leading to graduation reduction in vacancy levels to approx. 13%. C. Spatial spread of Commercial activity in Chennai The commercial office market space in Chennai is divided into the following vectors: Spatial Spread Split of Cumulative supply by region (t otal 63 mn sft) Graph 3 CBD: CBD & Off CBD 25% SBD: MPR & Taramani + OMR 1 41% Figure 13 PBD: Ambattur, GST, OMR 2 & 3 34% Source: CBRE Research

27 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 26 Zones Key Micro Markets Cumulative supply Vacancy CBD Central Business District Key Characteristics Quoted Rental 14 (INR / sft / month) Primarily comprises of small medium scale developments Central location and good connectivity to established and emerging parts of the city acts as a key demand driver for office space activity CBD Anna Salai Nungambakkam RK Salai T Nagar Chetpet 7.8 mn sft 15% Steady inflow of commercial office space witnessed in the past 4-5 years characterized by medium scale office space buildings by local developers Prominent Grade A developments: Prestige Palladium, Prestige Polygon, Acropolis Key occupier profile: IT/ITeS and Banking/ Financial Services; Increased preference witnessed from sectors like BFSI, Engineering, and Telecom witnessed in the past few years in this region Characterized by medium-scale developments Off CBD Guindy Vadapalani MRC Nagar Adyar 7.6 mn sft 14% Caters primarily to spillover demand from the CBD vector considering space availability at fairly lower rentals Prominent Grade A developments: Olympia Tech Park, Tamarai Tech Park, TVH Bellicia Towers, etc Occupier profile: IT/ITeS, BFSI, Engineering and Manufacturing 14 Quoted Rental for warm-shell spaces

28 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 27 Zones Key Micro Markets Cumulative supply Vacancy Key Characteristics Quoted Rental 14 (INR / sft / month) SBD Secondary Business District Most preferred IT/ITeS destination in the city ~ highest share of investment grade commercial office space supply is present in this micro-market Majority of the supply in the region is constituted by investment grade OMR 1 Taramani Perungudi Kandanchavadi 18.6 mn sft 3% large IT Parks/ SEZ developments by Tier 1 National level developers The location has emerged as the most preferred office space market for IT/ ITeS tenants and witnesses limited/ negligible vacancy levels Non SEZ: SEZ: Prominent Grade A developments: Ramanujam IT City, SP Infocity, RMZ Millenia Occupier Profile: IT/ITeS, Engineering and Manufacturing, Automotive, etc. Evolved as an Alternate Business District and an established commercial office space destination owing to the presence of a single large Grade A SEZ development viz. DLF Tech Park (approx. 6.4 million sft) MPR Manapakkam, Mount Poonamallee Road 7.2 5% DLF IT Park is considered as one of the most successful IT SEZ developments in the city owing to the quality of development, branding of the developer in the office space business, connectivity attributes, proximity to residential markets, etc. ~ reflective of Non SEZ: SEZ: consistent demand, negligible vacancy levels and pre-commitments witnessed across under construction blocks Prominent Grade A developments: DLF IT Park, Jayant Tech Park Occupier Profile: IT/ITeS, BFSI, etc.

29 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 28 Zones Key Micro Markets Cumulative supply Vacancy PBD Peripheral Business District Key Characteristics Quoted Rental 14 (INR / sft / month) OMR 2 Thorraipakkam Shollinganallur 10 17% The second stretch of OMR post the toll is referred to as OMR 2 and witnesses a fair share of office space activity Witnesses spillover demand from the OMR 1 region ~ scalability options and competitive rentals viz. OMR 1 are considered as key enablers for this region Prominent developments: Chennai One, TECCI Park, Tek Meadows Occupier Profile: IT/ITeS, Engineering and Manufacturing, BFSI, etc. Non SEZ: SEZ: OMR 3 Navallur Padur Siruseri % Demand primarily driven by spill-over from the neighboring commercial office markets viz OMR Zones 1 & 2 Average absorption levels ~ owing to nascent characteristics of the market, preference of corporates to be located in established locations, significant competition from the neighboring markets, limited availability of social and physical infrastructure High vacancy levels witnessed in the market ~ considering peripheral nature of the location with limited & spread out real estate activity Prominent developments: ETA Techno Park, Ozone Techno Park, Pacifica IT Park Key occupier profile: IT/ITeS and Engineering & Manufacturing Non SEZ: SEZ: GST GST 2.7 5% GST has traditionally been an industrial hub; however, witnesses presence of two large scale IT Park developments Prominent Developments: Shriram IT Gateway, Ascendas Cybervale Key occupier profile: IT/ITeS and Automotive Non SEZ: SEZ: Both Site 1 & Site 2 under the purview of this study are in the CBD & Off CBD region. The following sections of the report would therefore entail a comprehensive analysis of the commercial office market dynamics on the CBD & Off CBD region

30 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 29 D. CBD & Off CBD Vectors (Subject Region) The CBD and Off CBD vectors have continued to be a preferred office space market for small to medium term requirements of Non IT & IT corporates. This is owing to the locational advantages the region has in terms of infrastructure, visibility, connectivity, etc. This dataset for this section of analysis would primarily Subject Region Snapshot 15 Particulars CBD O ff CBD Total Cumulative stock (mn sft) Occupied stock (mn sft) Current Vacancy 15% 14% 14% Growth in Stock ( ) 3% 5% 4% Table 2 be the MTB spaces located in the CBD and Off CBD markets as mentioned above. However, in addition, it is important to note that there are independent buildings such as corporate offices, government buildings, etc. as profile in the previous module of site and location analysis. 1. Supply and Absorption Dynamics Supply and Absorption in the CBD & Off CBD Vectors Last Decade Graph 4 Source: CBRE Research CBD has witnessed sustained demand levels over the last decade indicating leasing activity in fresh and second generation spaces. We have a CAGR of 5% from for cumulative supply of commercial office space and the region has witnessed an average influx of 400,000 sft new supply over the few years. CBD witnesses average supply additions to the tune of approx. 400,000 sft shared by 2-4 small to medium scale developments. Prevailing land values, paucity of developable land and challenges in terms of scalability has prohibited large scale developments in the region. Further, the absorption over the last few years has remained steady with approximately 800, ,000 sft per annum mostly indicating the expansion of existing client, fresh offtake from newer businesses entering the city and churn in the market. This region continues to be a preferred office space destination for Non-IT corporate clients 15 Source: CBRE Research

31 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 30 and front offices of large IT Corporates. Also, the current vacancy is at approx. 14% which is comparable to the overall vacancy levels in the city. Majority of the vacancy in the market is reflective of newer development completions (40% of developments that are completed over the last 3 years) and vacancy in older buildings that are not attractive for clients. Further, based on the current trend of absorption and considering the new supply which would enter the market in the next two years, we understand that there would is a supply overhang of ~1.5-2 years for marketable spaces in the region. 2. Format of development Majority of the developments in the CBD region are Non- IT office space developments. IT space 16 is primarily contributed by large IT parks viz. Olympia Tech Park, Tarmarai Teck park located in the Off CBD region. This is owing to the fact that the CBD, being the Format of development by cumulative supply - CBD & Off CBD (15.5 mn sft) center of the city is predominantly preferred by Non- IT Corporates viz. BFSI, Engineering and Manufacturing, Media, Logistics and Consulting corporates. It is witnessed that IT/ ITeS tenants occupy the CBD and Off CBD areas for their front office/ sales office / corporate office requirements. However, large scale operations of the same tenants are in OMR or MPR micro markets as they prefer to be present in large office spaces with scalability options & be present in an IT/ ITeS eco system owing to the operational advantages the eco-system offers. Further, the CBD is also home to many local business houses viz. MRF, TVS, Mahindra & Mahindra, etc. Graph 5 Source: CBRE Research IT / Non-IT Commercial Office Developments Prominent IT Developments Grade A Olympia Tech Park Guindy Off CBD 1.3 mn sft Prestige Polygon Nandanam CBD 0.5 mn sft Tamarai Tech Park Guindy Off CBD 0.4 mn sft Prominent Non IT Developments Grade A Prestige Palladium Thousand Lighrs CBD 0.3 mn sft Table 3 Sunnyside Nungambakkam CBD 0.2 mn sft 16 As defined in the Information Technology Enabled Services (ITES) Policy of Tamil Nadu, 2005

32 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Grade of Commercial Office Space Developments Further, the grade of office space development from a CBD and Off CBD context have played a major role as they are one of the areas to offer organized office spaces. Considering the same viz. the age of the building and the specifications offered, a significant share of the supply in the CBD & Off CBD region are today classified as Grade B & C developments. However, large scale IT Parks in the off CBD region are predominantly Grade A quality. 17 Format of development by cumulative supply in the CBD & Off CBD (15.5 mn sft) IT commercial office space developments contribute to approx. 43% of the cumulative supply ~ majority of which are located in the Off CBD region. Further, we understand that rentals for developments typically take the Grade of development as an important parameter ~ the lack of amenities / specifications provided in Graph 6 Source: CBRE Research Grade B & C developments act as a deterrent for demand & achieving rentals 4. Scale of development Considering the location, availability of land, prevailing land values and development potential, small to medium scale buildings are predominant in the CBD & Off CBD regions. Scale of Developments - By number of developments & size in sft Graph 7 Graph 8 Source: CBRE Research 17 Grade of development is typically reflective of the specifications and amenities offered, age of the building, parking, professional building and facilities management, maintenance and upkeep, etc.

33 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 32 Majority of the developments in the subject region are typically less than 150,000 sft in scale (~75%). Olympia Tech Park and Tamarai Tech Park in Guindy (Off CBD region) are the largest campus style developments upwards of 300,000 sft. SBD and PBD areas in the city offer large scale IT Parks and SEZ developments over 1 mn sft. 5. Analysis of Occupiers 5.1. Typical Occupier Profile The exhibit below represents the occupier profile of tenants located in the commercial off space developments in the CBD and Off CBD region. The exhibit below is an illustration of the office space uptake by specific sectors in the region: Current Occupier Profile in Subject Region Occupier profile split in CBD & Off CBD Graph 9 Graph 10 Source: CBRE Research Majority of occupiers in the region are (~36%) are IT / BPO / KPO Corporates; however, it is observed that approx. 65% of these are located in the Off CBD region, particularly contributed by the presence of large scale IT developments viz. Olympia Tech Park & Tamarai Tech park in the region ~ IT/ITeS prefer large spaces and larger floor plates which are not prevalent in the CBD region. Further, the Non IT tenant categories driving demand for office space include BFSI, Engineering and Manufacturing, Research & Consulting, Media and logistics. We also understand, that these occupiers typically are present in the CBD Region viz. the Off CBD region. Prominent occupiers by segments IT / ITeS Verizon TCS Oracle HP Wipro HCL BFSI BNP Paribas HDFC Citibank ABN AMRO RBS ICICI Bank Engineering and Manufacturing Ansaldo Siemens Exide industries ltd Philips Future Metals St. Gobain Others RR Donelley Hewitt Regus HTC Mascon global Samsung Table 4

34 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Scale of transactions (in sft) In this section, we have analyzed the scale / size of transactions (in sf) that have been witnessed in CBD and off CBD regions in the last three years. Typical scale of transaction The CBD and off CBD region witnesses majority of transactions in the 5,000 15,000 sft range per transaction ~ approx. 55% < 5,000 sft: Key absorption witnessed in Media, Logistics, Research & consulting occupier segments 5,000 10,000 sft: Majority of these transactions comprise of tenants in the IT/ITeS, BFSI & Engineering segments 10,000 15,000 sft: Approx. 50% of occupiers in this size Source: CBRE Research Graph 11 segment are IT/ITeS occupiers; further, majority of them are located in the off CBD owing to availability of IT developments, large floor plates, etc. are present in the off CBD region The IT/ITeS sector followed by BFSI, Engineering and Manufacturing, Research & Consulting are the key occupier segments in this region. Further, average space per transaction offtake is highest in IT Commercial developments & in developments located in the off CBD zone. Development Name Company Name Area transacted (sft) Rentals (psft / month) CBD Prestige Palladium Pfizer 16,000 sft INR 75 Prestige Polygon Gigamon 17,000 sft INR 82 Arihant Nitco Park Benteler 7,700 sft INR 60 Prestige Polygon Toray Industries 5,500 sft INR 75 Lebera Towers BAF 4,500 sft INR 65 Table 5 Off CBD Kochar Bliss Apex Knowledge Solutions 9,000 sft INR 63 TVH Beliciaa towers CAMS 29,000 sft INR 60 Majority of the leases in the CBD and off CBD region are witnessed to be warm shell spaces with typically lease terms of years with 15% escalations built in every three years

35 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Rental Trends The rental trends across the city for the various zones have been illustrated below for the past 5 years: Graph 12 Source: CBRE Research Rental Trends for for CBD and Off CBD Zone CAGR ( ) CBD 5% Off CBD 6% OMR 1 + Taramani 14% MPR 8% OMR 2 5% OMR 3 8% Ambattur 8% GST 2% Table 6 Rental values in the CBD region is a premium compared to the rest of the city however, the growth rate has been steady and considered to be performing at threshold levels (CAGR growth of 5%). Further, off CBD rentals today are very much comparable to the SBD market rents of OMR 1 and MPR because of significant demand by IT/ ITeS tenants located in this vector. Furthermore, Off CBD markets in comparison with CBD offer marginally discount considering the scale of supply, distance from the city, prevailing land values, etc. Another important parameter to note in the CBD and Off CBD region is that, it is predominantly comprised by small to mid-scale Grade B & C commercial developments where are deteriorating in terms of the quality and upkeep and therefore, reflect is limited or no appreciation of rentals. Additionally, rental value in the Chennai market at an overall level and specific to the CBD region is reflective of the vacancy in the market/ specific buildings at the time of leasing. Also, in a few cases, non IT tenants taking up smaller areas are witnessed to have paid a marginal premium as compared to IT / IT tenants in the CBD region. Quoted rentals in the CBD region today by Grade A developments is in the range of INR 80 to 88 per sft per month and quoted rentals in the Off-CBD region by Grade A developments is in the range of INR 70 to 75 per sft per month. Based on CBRE on-ground market experience of representing tenants, we understand that rentals mentioned above are quoted in the market, however the transacted rentals are approx. 8-10% lower ~ there is a threshold of INR 80 per sft per month, higher than which closing deals becomes a challenge. However, recent transactions in the CBD region were closed at a range of INR 70 to 80 per sft per month for buildings that are marketing a small share of their inventory.

36 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Cost of construction of Commercial developments The typical cost of construction for a Grade A commercial office space development is witnessed to be approx. INR 2,800 to 3,500 psft including the External Development Costs, cost of utilities, warm shell office spaces. Further, the following are a few benchmarks to understand the unit cost of construction incurred for a few commercial developments. Development Name Cost of Construction CBRE Comments Ramanujan IT Park Phase 2, Chennai ~3,000 Exclusive of utilities provided (was constructed as part of phase 1) RMZ One Paramount, Chennai 4,600 LEED Certified Gateway IT Park, Chennai 3,340 Cost as of 2017 World Trade Center, Chennai (Under construction) 3,500 Built as per the WTC standards adjusted to Chennai market expectation Embassy Tech Zone, Chennai 3,500 4,000 Bought existing structure and worked over it, LEED Certified World Trade Center, Bangalore 3,500 Cost as of 2012 Table 7 Note: Cost of construction mentioned in the table above is based on information available as part of CBRE internal databases and not an actual estimation based on Bill of Quantities

37 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Key benchmarks in the CBD & Off CBD Region A benchmarking of key parameters across prominent commercial developments located in the CBD and Off CBD to understand key performance parameters such as product proposition, occupancy patterns, rental trends, USPs, key occupiers, key enablers and challenges, etc. have been carried out. Figure 14

38 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 37 # Commercial Development Vector Developer Location Scale of development (sft) Year of completion Grade of development LEED Certification Type of development Quoted Rentals (INR psft/ month) Vacancy (%) 1 Prestige Polygon CBD Prestige Group Anna Salai 535, A None IT % Key Occupiers: Microsoft, Gigamon, Viviti Technologies Pvt. Ltd, Grant Thorton; Occupier Profile: IT/ITeS, Research and Consultancy This is one of the very few developments in the CBD region which has an IT Building status (additional FSI for an IT building is provided) IT building status was witnessed to have been a challenge for the developer considering the building was large scale in comparison to other CBD buildings which are typically <150,000 sft ~ owing to the preference of IT tenants to be located in a larger eco-system Timeframe for lease was approximately 4 5 years which is fairly longer than the average leasing timeframe in the market The anchor tenant RR Donnelley occupies approx. 30% of the total leasable area 2 Acropolis CBD AR Foundations RK Salai 209, A None IT < 5% Key Occupiers: Citibank, RR Donnelly; Occupier Profile: BFSI, Publishing, IT/ITeS Acropolis was among the early entrants in the Grade A IT/ITeS commercial office space segment in the CBD region ~ leased out majority of its first-generation space in the initial couple of years Strategic location advantage juncture of RK salai provides the building excellent connectivity and visibility attributes The building has always had an exclusive positioning and the developer has been selective about attracting marquee corporate occupiers ~ majority of corporates have remained in the development for more than 9 years owing to its central location, lack of large scale supply in the region, good quality of space offered, etc.

39 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 38 # Commercial Development Vector Developer Location Scale of development (sft) Year of completion Grade of development LEED Certification Type of development Quoted Rentals (INR psft/ month) Vacancy (%) 3 Bannariamman Towers CBD Bannariamman RK Salai 67, A None Non IT % Key Occupiers: Mitsubishi, Zynergy Solar, Schneider Electric, French Consulate, Korean Trade Center; Occupier Profile: Automobile, Electronics, Foreign Bodies 4 Bannariamman towers been judicious while leasing space to occupiers in order to maintain the positioning for the development - houses a consulate, foreign trade bodies, FMCG & Automobile giants This development has occupiers across various non IT tenant categories and would be one of the very few developments which does not house a single IT/ ITeS tenant (no significant need to have an anchor tenant considering the scale of development) Prestige Palladium CBD Prestige Greams Road 260, A None Non IT 80 < 5% Key Occupiers: Saipem, PWC, Mitsubishi, HP, Hospira; Occupier Profile: Engineering & Manufacturing, IT/ITeS, Professional Services Prestige Palladium majorly houses Non IT occupiers across various tenant categories The key USPs of this development would be its central location, developer branding, rational rental for a grade A space offered, etc. 5 Seethakathi Business Center CBD ETA Star Teynampet 182, A Gold Rated Non IT % Key Occupiers: Siemens, Cresent School of Business; Occupier Profile: Engineering & Manufacturing One of the drawbacks that the development has faced is that it has been strata sold. Multiple owner developments are typically less preferred by occupiers

40 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 39 # Commercial Development Vector Developer Location Scale of development (sft) Year of completion Grade of development LEED Certification Type of development Quoted Rentals (INR psft/ month) Vacancy (%) 6 Seshachalam Center CBD Ceebros Anna Salai 64, B None Non IT % Key Occupiers: Bank of Tokyo, JETRO, Butterfly, Hero Motocorp; Occupier Profile: BFSI, Engineering & Manufacturing A unique factor witnessed in this development is the predominant presence of Japanese corporates which has enabled a specific positioning for the building 7 Temple Steps CBD Individual Anna Salai 307, B None Non IT 60 <5% Key Occupiers: Citigroup, DHL, Zifo Group, Stayzilla, Agility Logistics; Occupier Profile: IT/ ITeS, Logistics, Media Temple steps was one of the first commercial office spaces constructed in the city; Further, the development has been strata sold and has multiple ownership It is an old development ~ provides for a significant discount from the market 8 Sunnyside CBD Sabari Group Nungambakkam 220, A None Non IT 75 <5% Key Occupiers: Bosch, Deutsche Bank, PPP Power Generation Company, Pfizer, Apollo Hospitals; Occupier Profile: Engineering & Manufacturing, Banks, Healthcare 9 Olympia Tech Park Off CBD Olympia Guindy 1,453, A Green IT % Key Occupiers: HP, Verizon, RBS, Visteon, Dell; Occupier Profile: IT/ITeS One and only IT Park development offering the benefits of being in a large campus style development with amenities such as food court, good car parking, etc. in the CBD region. This development had a first mover advantage when it was constructed in Guindy in 2006

41 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 40 # Commercial Development Vector Developer Location Scale of development (sft) Year of completion Grade of development LEED Certification Type of development Quoted Rentals (INR psft/ month) Vacancy (%) 10 Further, it was one of first developments to receive an IGBC certification which was one of its USPs Average achieved rentals in the building is significantly lower than the market on account of more than 50% of the space being leased to anchor tenants of HP and Verizon who have stayed in the building since inception It is important to note that HP who is a large space occupier from a overall Chennai context has expanded in multiple locations but continues to hold space in the development; Attractive lease rentals have been negotiated at the time of lease renewals to continue occupancy in the building Tamarai Tech Park Off CBD Ashok Matches & Timber Industries Pvt. Ltd Guindy 440, A None IT 75 < 5% Key Occupiers: ABCO Advisory, Matt McDonald, Erricson; Occupier Profile: Research and Consulting, Engineering & Manufacturing Tamarai tech park located adjacent to Olympia was the next largest development in the region which witnessed good traction as an IT Park development in an off CBD market Majority of the primary leasing occurred in the first two years to anchor tenants ~ Approx. 50% of space was leased to a large Engineering and Manufacturing sector tenant who still occupies the development Table 8

42 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 41 Case Study TIDEL Park, Chennai TIDEL Park, Chennai has been developed as a joint venture between TIDCO & ELCOT in The development marked the beginning of commerical office space activity along Rajiv Gandhi Salai, the designated IT corridor of Chennai. The IT park comprises of a built up area of approx. 1.2 million sft ~ a iconic development of its time considered to be a forerunner for IT/ITeS activity in the city. The success of the development posed as a catalyst to TIDCO who also ventured into joint developments with Tata Realty and Ascendas to mark a start of the IT eco-system in the city. The key objective of TIDEL Park was to provide necessary infrastructure for IT/ITeS clients therby promoting the IT/ITeS industry in the city. TIDEL park had achieved 100% accupancy post 3 months of its inaguration. Approx. 20% of the commerical space developed was strata sold to nine companies and approx. 820,000 sft of commercial space was leased out to corporates. In the initial phase, the development witnessed absorption from 6 7 corporates who took up approx. 50% of the leasable area ranging between 35, ,000 sft per corporate. Further, we also understand that TIDEL has maintained a 100% occupancy for most part of its existence. The rental realised for the development in its early stages was approx. INR psft per month, however the same declined to INR psft per month owing to the global economic crisis in The same has improved over time and currenlty, the average achived rental is INR psft per month. Additionally, a flat rental system is followed, wherin all the tenants pay the same rental irrespective of the space occupied by them. Apart from commercial office space, the development also houses a food court, retail outlets, gymnasium, day care, auditorium facilities, etc. to cater to the working populace in the development. The building has been designed as 4 blocks and 8 modules with large common areas resuling in an efficiency of 60 65% which is significatly lower than the market average of effeciency of 80 85%. This has posed as a great challenge to them while the consideration of rental escalations. Further, we also witnessed that approx. 75% of the tenants (INautix, TCS, Ajuba Solutions, Cognizant, etc.) who are currently present in TIDEL Park have occupied the development from ~ tendancy to stay at TIDEL over a long period owing to locational and rental advantage. Snapshot Commencement 2000 Location Ownership Key Partners Table 9 Table 10 Area Taramani, Chennai Government TIDCO, ELCOT 1.28 mn sft TIDEL Park, Chennai TIDEL Park was one of the first IT developments in the country to be backed by the Government. The development was instrument al to mark the start the IT revolution in the city. The product mix offered in terms of specifications and amenities was considered futuristic and the building was perceived to be an iconic lan dmark in the region. The world class development motivated large national and international corporates to be part of this monumenta l development.

43 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Future Outlook: The supply side of commercial office activity in the city is expected to undergo a massive transformation in the medium to long term. Approx. 15 million sft of supply is in the pipleline with approx. 10 million sft under construction. Further, 50% of under construction supply in in the SBD region of OMR 1 & MPR. Also, future supply of mn sft is expected in the CBD and off CBD region in the short to medium term characterized by 5 6 developments in the range of 100,000 to 300,000 sft. Further, there are limited large land parcels available in the city and similar development trends are expected in the CBD market from a supply stand point. Based on CBRE Research, below is a list of developments in the pipeline in the CBD and off CBD region. Indicative list of Developments in the short term Name of Development Micro Market Zone Area (mn sft) Y e ar of Competition VST Group Anna Salai CBD Akshaya Shanthi Anna Salai CBD Olympia TEKNOS (Daynatron Building) Guindy Off CBD Olympia National Guindy Off CBD SKCL Tech Square Guindy Off CBD Prestige Metropolitan Anna Salai CBD ASV Hansa II Anna Salai CBD Prestige Cosmopolitan Guindy Off CBD Table 11 Kochar Globe Guindy Off CBD

44 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Emerging trends in commercial office space Shared Office Spaces Business centers, Co-Working spaces & Incubators / Accelerators A shared office space is a work-place that brings together individuals/ groups of people working towards varied focuses to work on a common floor. Shared office space is a recent trend that is witnessed, providing a complete range of workspaces, often accompanied by a variety of support services. Evolution of Co-Working Spaces in India Figure 15 Source: CBRE Resarch The use of co-working spaces is expected to rise, with the concept being adopted not only by startups and individuals but also by well-established corporates with fluid expansion/occupation plans. This is expected to push up the share of co-working spaces in overall space leasing. It is likely that an increasing number of domestic and international operators will offer co-working solutions, thereby raising the quality of space offered. Few top co-working space operators currently operational include CoWrks, Skootr, Awfis, Smartworks, 91springboard etc. Key Demand Drivers for Shared office spaces: Affordability: Shared office spaces offer cost-effective alternatives to traditional office spaces, along with access to a diverse range of amenities. Further, there are negligible capex requirements Flexibility: The option of working from multiple offices within the same city helps to ease traffic woes a key factor in all top Indian cities this is key demand driver for corporates evaluating and leasing shared office spaces Community and collaboration: Entrepreneurs/startups can benefit from the shared office environment due to 'shared-knowledge' opportunites offered Advances in Technology: Technology advances have enabled people to work independently from any location and at any time, thereby encouraging shared office space demand

45 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 44 The Startup Boom: Startups are among the major users of shared office spaces, with India estimated to have 11,500 startups 18 by 2020 Forign entrant corporates: Co-working spaces are an ideal option for corporates testing Indian waters due to their cost-effective and flexible leasing term Shared office spaces in Chennai: The shared office space market in Chennai is in its nacent stages and currently the city has organized shared office spaces. Further, we understand that approx % of these spaces are located in the CBD and Off CBD region. Major operators in the Chennai context are Regus, Workafella, MLS, Doxa, TEC, Coworks, etc. Further, based on interactions with we understand that majority of the Shared spaces in the CBD & Off CBD regions witness an average occupancy of 70 80% 19. Apart from start-up s and small businesses, we have also witnessed an interest in shared spaces by large corporates. Prominent Shared Spaces in the CBD & Off CBD region Spaces 35,000 Express Avenue Regus 10,300 KRM Plaza isharespaces 8,300 Ispahani Center India Business Center 9,000 Kochar Bliss Re cent lease transactions in Shared spaces Prestige Paytm Workefella 50 seats Palladium International Shyamala Regus 40 seats Flavors Towers Table 12 Accelerators / Incubators in Chennai: Another key trend which is upcoming in the Commercial office ecosystem is accelerators / incubators. These are spaces which offer entreperuers / start ups a office space coupled with the guidance of industry experts / investors. In Chennai, these services are offered by a company viz. The Start Up Center which is located in Thiruvanmiyur. It acts as a startup hub for budding entrepreneurs looking for the right guidance and working environment based at Chennai; an ecosystem which is vibrant in terms of entrepreneurial, technical and design talent. The Centre was designed in a way to leverage an open floor by learning from each other and being able to pivot and build quickly. The mentors of The Startup Centre will be available to interact with on a regular basis to render guidance to the teams. They provide furnished office space, high-speed wireless internet, plenty of power outlets, and a fully stocked pantry for the duration of the program. Members also have access to a library of books which is perfect for aspiring entrepreneurs and young startups. Similar programs have been initatied in other cities viz. Hyderabad, Mumbai, Delhi, etc. The shared office space concept is its nascent stages in Chennai, however, the market continues to witness demand from flexible workspaces occupier perspective. With the highest density of centers, and mix of operators, the CBD & Off CBD regions are a leader in terms of supply and demand at a city level. 18 Source: Indian Startup Ecosystem Maturing " report by Nasscom-ZINNOV 19 For the past 6 months

46 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 45 Case Study T Hub, Hyderabad T-Hub, is a unique start up hub concept conceptulised and implemented in Hyderabad. It has been formed as an unique public/private partnership between the government of Telangana, 3 of India s premier academic institutes (IIIT-H, ISB & NALSAR) and key private sector leaders. It is registered as a non-profit organization and is a platform for the amalgamation of entreprenuers, mentors, investors and academia. The development Snapshot Commencement 2015 Location Ownership Key Partners Area Table 13 IIIT Campus, Gachibowli, Hyderabad Public-Private Partnership Telangana government, IIIT-H, Indian School of Business (ISB), NALSAR Law University 70,000 sft admeasures approx. 70,000 sft with world-class infrastructure facilities at the building will be used for co-working spaces, meetings, mentoring, networking sessions and conferences. There are currently two kinds membership programes that are offered to the startups: 1. Catalyst - Catalyst is T-Hub s startup incubator and it aims to supports and promote technological innovations occurring in the Hyderabad startup ecosystem. Early-stage startups with a minimum viable product (MVP) and with some traction in the market can apply. It offers three seating options: a. Open seating b. Dedicated desk c. Private office 2. Virtual Membership This is a lcoation independent membership for etrepreneurs who require the services of an incubator but still want to maintain their own offices T-Hub has incubated 346 start-ups and 835 associated start-ups. It was found that Telangana is all set to emerge as home to the largest tech incubator in the world upon completion of construction of Phase-II by the end of year 2018 adding 3.60 lakh square feet of space to the existing 70,000 sft. Further, we also understand that T Hub is evalutating setting up start-up incubators in other states as well. 20 T Hub is considered as a successful concept that amalgamates the involvement of academia, Government and the Business eco-system while catering to the emerging market needs considering the background for the subject property, significant opportunity to function in this segment 20 Based on interactions

47 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 46 Module 4: Case Studies Iconic Commercial Office Developments Case studies of Iconic commercial developments have been undertaken 21 in this module to understand their product concept, development strategy, best practices followed, demand drivers of such iconic buildings, etc. 21 Secondary research

48 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 47 A. South India Case Studies # Commercial Development Vector Developer Location Scale of development (sft) Year of completion Grade of development LEED Certification Type of development Quoted Rentals (INR psft/ month) Vacancy (%) 1 Prestige Trade Towers CBD Prestige Vasanth Nagar 368, A None NA % Key Occupiers: Deloitte India, The Executive Centre, Viacom 18, Anarock; Occupier Profile: Research & Consulting, Business Services, Media Prestige Trade Towers is strategically located near Chalukya Signal, at the heart viz. CBD of the City ~ with a commanding view of the Karnataka Golf Association s 18 hole Golf Course The iconic tower structure maintains crisp classical proportions progressing vertically as a series of stepped volumes, cappe d by a distinctive back lit celebratory top a luminous beacon on the city s skyline The development comprises of a 4 storey retail podium of with an Office Tower rising 20 storeys above it; It also boasts of having a helipad The building is operational since last year and has been able to command one of the highest rentals in the city owing to its central location, iconic status & design and efficiency Discounted rentals were offering during the construction phase of the property in order to attract marquee anchor tenants for the property 2 World Trade Center CBD Brigade Enterprise Yeshwantpur 1,100, A None NA 100 < 5% Key Occupiers: Amazon, ABB, Micra Energy, Muthoot Finance; Occupier Profile: IT/ITeS, Engineering & Manufacturing, Research & Consulting

49 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 48 The World Trade Center in Bengaluru is set in a 40 acre integrated campus with a premium positioning and encompasses the WTC building, Orion shopping mall, the Sheraton Hotel, Colombia Asia-multi-specialty hospital, a large residential apartment complex, a school and Galaxy club with social, recreational and fitness facilities ~ the integrated township & presence of the WTC branding has made this an iconic commercial development in the city World Trade Center (WTC) Bengaluru, a licensed member of the World Trade Centers Association (WTCA), headquartered in New York, comprising a network of 330 Centers in over 100 countries ~ TCs globally form a vital part of a dynamic, global economy and play a pivotal role in helping businesses grow beyond their local boundaries The structure comprises of 31 floors and is home to headquarters of Amazon India, ABB and several other Multi-National Corporations WTC, initially conceptualized as a corporate office tower faced challenges for leasing in the initially years as it was a new office space vector with residential activity predominantly. Further, as a part of the strategy, Amazon was targeted as an anchor tenant at a discounted rental to occupy almost 50% of the overall space WTC today is one of the preferred office spaces in the city by IT and non IT tenants owing to the following reasons: o Product offering integrated development with focused positioning; Synergizes with almost all asset classes in the campus viz. residential, retail, hospitality and other support components o Alternate Business District/ Off CBD location o Quality of office space best in terms of specifications and facility management o Accessibility benefits majority of the key office space markets in the city faces traffic bottlenecks viz. Whitefield, Sarjapur Road, etc. o Infrastructure availability while infrastructure in almost all office space markets in the city are in planning and implementation stages, subject micro-market offers excellent connectivity via Metro rail o Iconic structure stands out in terms of preference by tenants vis-à-vis other normal developments (however, do not really command a premium on rental values) o Developer branding Brigade Group is a prominent brand name in the Bangalore and South India market with prior executional capabilities o WTC branding networking opportunities in the trade platform Table 14

50 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 49 B. International Case Stud # Commercial City Development Location Developer Location Scale of Year of development completion Product Mix Commercial Component 1 Petronas Twin Towers Kuala Lumpur, Malaysia KLCC 22 Holdings Sdn Bhd KL City Center 4.25 mn sft 1999 Commercial, Retail, Gallery and Exhibition, Hospitality, Public Parking TOWERS (All 88 Floors): Tower 1: Corporate HQ for PETRONAS & a number of its subsidiaries & associate companies Tower 2: Leased office space for private companies & portion of a Multimedia Conference Centre Retail Podium: SURIA KLCC Mall stores, 2 megastores 13 screen Multiplex Events and Entertainment: Dewan Filharmonik Petronas Concert Hall Galeri Petronas & Malaysian Petroleum Club Petrosains Petroleum Discovery Centre Multimedia Conference Centre Key Occupiers: PETRONAS, Huawei Technologies, Accenture, AVEVA, IBM, Microsoft The PETRONAS Twin Towers tallest twin towers in the world are the centerpiece of a 10 Acre mixed use complex called the KLCC, which is conceived as the sociocultural economic hub of the city developed on the lines of promoting the visibility of KL on a global summit From once being the tallest skyscraper to currently being the most visited tourist & cultural destination in Malaysia, the propaganda of the development has been communicated efficiently through keeping commercial activities as the central objective, subordinated with offering a supporting cultural & leisurely add-on which enhances the viability of tourism at the venue 2 K 100 / Kingkey Financial Tower Shenzhen, People s Republic of China Shenzhen Kingkey Real Estate Development Shennan Road, Caiwuwei 2.26 mn sft 2011 Commercial, Hospitality, Retail, Observation and Commercial Office Space: 69 Floors KK Mall: 5 Floor retail & entertainment center 150 shops 22 KLCC ~ Kuala Lumpur City Center

51 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 50 # Commercial City Development Location Developer Location Scale of Year of development completion Product Mix Commercial Component Company Limited Restaurants, Parking Hospitality: St. Regis Hotel: a 6 Star Luxury hotel with 257 guest rooms & 40 designer suites The KK100 tower is an integrated mixed-use development project, intended to create a high density apex profile commercial space building between the Louhu s business district, a key urban landmark befitting Shenzhen s role in China s economic and cultural development The Tower serves as a Mini-city which provides an amenity-rich focal point back to the community, offering a 24-hour city-life to be better for the environment and human interaction, at social, commercial & leisurely interfaces Table 15

52 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 51 Module 5: Opportunity Assessment CBD and Off CBD zones Parameter Supply Absorption Occupier Profile Summary Currently the CBD and off CBD region comprise of 25% of the city s cumulative supply ~ 15.5 million sft This region has witnessed an average supply influx of approximately 400, ,000 sft over the last three years across approx commercial developments; Majority of developments are small to medium scale developments ~ majority of developments range between the sizes of 70,000 to 80,000 sft Underlying land values in the CBD region, paucity of large developable land parcels has prohibited large scale developments in the region Supply in this region is constituted with an almost equal split of Grade A and B developments; however, the specifications provided in the large-scale IT parks in the peripheral regions viz. Ramanujam IT City, DLF Tech Park, SP Infocity are far superior than the Grade A developments in the CBD & Off CDB zones Future development of approx million sft is expected in the CBD and off CBD region in the short to medium term The CBD and Off CBD regions have witnessed steady absorption levels of approx. 800, ,000 sft annually holding approximately 20% market share of the total annual absorption the city witnesses The same is accounted to by absorption in both first and second-generation spaces ~ reflects the preference of corporates to be in the same region The current vacancy levels are at approx. 14% ~ attributed to threshold demand levels CBD & off CBD markets operate on owing to factors viz. limited scalability options, space offtake by Non IT tenants typically approx. 5,000 to 15,000 sft, preference for IT occupiers to be present in IT eco-system, etc. Further, based on the current absorption levels & upcoming supply, we understand the current supply overhang is 2 3 years Currently, the major occupiers in the region comprise of IT/ITeS Corporates and Non-IT tenants from BFSI, Engineering and Manufacturing, Research and consulting, etc.

53 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 52 Further, the CBD region also witnesses a presence of offices of local business houses viz. TVS, Sundaram Group, IOB, etc. Emerging trends Benchmarking City Level Case Studies Other cities Shared working spaces (co-working spaces & incubators) are a new trend in the commercial office space market which has maximum presence in the CBD and off CBD region Successful benchmarks typically are selective about their tenant profiles this ensures the development to maintain positioning of the development Branding and marketing strategies adopted play a key role in determining the marketing timeframe of the developments Case studies of iconic developments in other regions show us that the design and concept of the development are major draw factors towards it Also, for the commercial development to be successful, there should be other components viz. hospitality, retail, etc. present in the development as value addition Based on the aforementioned modules, we understand that there is an opportunity to introduce large scale Grade A supply in the CBD region as the location witnesses latent demand for large scale developments. An integrated development with the presence of hospitality, small scale retail is a concept that has not been witnessed in the CBD, synergies exhibited by the components of integrated development would add significant value to the envisaged development. Further, considering the supply overhang in the market, future supply expected and absorption levels ~ there is opportunity to create a commercial office space development diffracted in terms of scale, specifications, grade of development, positioning, etc. The demand assessment for the commercial component and the recommended product mix are illustrated in the forthcoming modules.

54 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 53 Module 6: Demand Assessment Demand assessment for the Pre-feasibility exercise has been undertaken based on prevailing market trends and future outlook for the office space market in Chennai. Below is a step by step illustration of the broad level methodology adopted to assess the demand potential for the proposed development: Demand Assessment Review of the overall supply, demand, churn and vacancy trends witnessed in the organized office space market in Chennai over the decade YoY top line supply trends in the market is witnessed to be in the range of 4 5 million sft annually with a declining trend in the last five years with limited supply additions; YoY top line absorption trends in the market is witnessed to be in the range of million sft annually; Vacancy levels are witnessed to have narrowed down An analysis of second generation space uptake in the market was assessed to be in the range of 30-50% Zone wise composition of supply and demand in the market were assessed CBD and Off-CBD together have constituted approx. 20% share of the overall market in the last 5 years market share of the region is considered to be subdued and the same has been controlled by the supply side activity (limited quality large scale supply has been introduced in the market) Review of the CBD/ Off CBD level supply, demand, churn and vacancy trends witnessed in the organized office space market YoY top line supply trends in the market is witnessed to be in the range of million sft with introduction of 2-5 building completions annually YoY top line absorption trends in the market is witnessed to be in the range of million sft annually split across fresh leasing in new building completions and secondary generation space uptake in the market An analysis of churn/ secondary generation space uptake in the market was assessed to have a<40% share in the market owing to small and medium scale development completions Absorption in the market has typically been reflective of the supply introduced and secondary leasing in the market because of tenants moving out of the region Identification of key demand drivers for the CBD/ Off CBD market Key demand drivers for the subject property is listed below: City center location CBD micro market which is a self-sustained economic hub with presence of commercial, retail, hospitality and

55 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 54 Demand Assessment residential developments; Easy accessibility to key urban nodes in the city and transportation infrastructure Naturally is the first choice for commercial office space tenants Existing and proposed infrastructure Located on the key spine / arterial corridor of the city; Subject micro-market will be one of the only office space markets to have metro connectivity in the near future; Expected to boost demand for the region significantly Steady demand from IT and Non-IT tenants in the market Past trends are reflective of the preference of tenants to be located in the CBD region Rental values comparable to that of SBD markets in the city the rental parity between CBD and SBD markets initially was approximately 20% prior to 5 years; However, the current market conditions have rationalized the same and the rental parity between a CBD and off CBD market is almost negligible making the subject property very attractive for tenants Limited vacancy levels in the subject region Limited competition in the market for similar nature of activity; Majority of the planned developments in the subject region are small and medium scale and do not have the locational advantages the subject property offers; To summarize, three key considerations from a tenant stand point would be the location, scale and connectivity SP is well positioned and can be classified at a premium compared to any competing developments in the city on the above parameters Assessment of future supply and expected absorption levels Approx. 15 million sft of supply is currently under construction and planning at a city level which is expected to hit the market by 2020; Additionally, another 4 million sft is expected to add to the supply by 2021 Further, of the total supply expected to come by 2020, approximately 12% - 13% is contributed by the CBD region constituted by about small scale to medium scale developments by tier 1 and 2 developers.

56 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 55 Demand Assessment Further, a layering of multiple approaches has been undertaken with sensitivities to project the demand for subject property: NASSCOM projects growth of Indian IT Exports at 7-8% during and 8-9% during the medium term; Further, Tamil Nadu holds a share of ~11-13% as a share of exports and majority share ~90% is contributed to by Chennai city; Share of TN and Chennai is expected to remain steady considering the market side dynamics and other support from the Government Tamil Nadu State s economy has picked up moderate growth and the GSDP growth rate at constant prices in is estimated to be 8.03%; Further, it is anticipated that the growth rate is expected to be 9% in the short term CAGR growth rate in absorption during was recorded to be 10% and 7% for the city and CBD/ Off CBD markets respectively Further, a split up of the absorption constitution every year can be summarized as below: Approx. 1.5 million sft of leasing activity every year is RFP driven (~2.5 mn sft of RFP s looking for office space in Chennai market is currently active) Pre-commitments to the tune of 1 million sft is witnessed in under construction buildings 23 * - is expected to emerge as a preferred market trend for large tenants in the industry Secondary leasing activity trends in the market of approx million sft Additionally, it has been witnessed that a significant share of the development completion gets absorbed on the year of development completion 23 Pre-commitments have not been a commonly prevalent practice in the Chennai market; However, considering the supply crunch witnessed in the past few years and significant share of supply expected to hit the market in the next 3-4 years, tenants are evaluating pre-committing to spaces to ensure lower rental values also keeping long term business expansions in mind

57 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 56 Demand Assessment Therefore, considering the above and based on CBRE in-house information on the enquiries in the market, absorption in 2018 is expected to remain as per the past years trends <5 million sft; However, the market is expected to graduate to a million sft market by 2021/ 22 considering the abovementioned factors and attractiveness of Chennai with regards to other south India cities. As mentioned above, the market share of demand catered by CBD and Off CBD markets is approx. 20% share of the overall market in the last 5 years market share of the region is considered to be subdued and the same has been controlled by the supply side activity (limited quality large scale supply has been introduced in the market) Considering the Introduction of SP to the market which addresses majority of the lacuna that the current supply in the CBD poses viz. Scale and quality of development, CBRE is of the opinion that CBD can garner a higher market share to the tune of 20-25%. Further, there is limited clarity on planned supply in CBD region beyond 3 years. Therefore, a fair share of approx. 20% market share for the subject property has been assumed and expected to lease out 250,000 sft 350,000 sft annually. Additionally, accelerated marketing can be achieved by looking at marketing the development as an Iconic building with premium positioning built to the best of International standards aided with the Government branding to attract tenants and thereby reduce the marketing timeframe. Note: Demand estimation has been undertaken based on a combination of qualitative and quantitative techniques at a high level as a part of this Pre-feasibility study; Detailed demand estimation projections will be provided as a part of the Detailed Feasibility Report Further, based on our discussions with the TNIFMC team, we understand that there is an alternative plan to accommodate the existing tenants of the TUFICO, TNHB & Periyar EVR developments in a separate building and would not be covered under the purview of the proposed developments under study. Therefore, the same has not be included for demand estimation.

58 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 57 Module 7: Product Mix Recommendations The product mix recommendations have been conceptualized keeping the key objectives of the Tamil Nadu commerce hub in perspective of: Creating a landmark for Chennai/ Tamil Nadu; Create world class commercial office space and attract marquee investments in the region; Build advantage for the Anna Salai region; Generate employment; Improve investment visibility and investment attractiveness The following two scenarios have been proposed for the TN Commerce Hub: A. Product mix recommendation 1: Product mix 1 is envisaged as an Integrated Economic hub with three key activity centers viz. Primary revenue generator Commerce Hub (An Iconic office space tower) Secondary revenue generator and Image enhancer Retail, Hospitality/ Tourism Hub (An Iconic tower connected to the primary component with a sky bridge The value enhancer or the Knowledge Hub Start-up city offering incubation and co-working spaces that could be modelled in the lines of T Hub in Hyderabad All the components are planned to function synergistically with each other and compliment activities. Product Mix Option 1 INTEGRATED ECONOMIC HUB Figure 16 Source: CBRE; Map for representation purpose only

59 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 58 The recommended product mix option has three elements: SITE 1 1. Commerce Hub: The commerce hub would the economic center of this concept. Envisaged to comprise of Grade A/ A+ commercial office spaces which should be positioned to target both National and International MNCs. This is proposed to be an iconic twin tower development and is expected to be designed by an International Architect offering world class infrastructure. The large scale office space tower in this location is expected to have enhanced visibility on Anna Salai. Scale of development: Base case: Maximum potential of approx mn sft Subject Site I (North) which admeasures approx acres. Components: Commercial office space 24, Support services viz. Food court, gym, salon, convenience stores, day care facility, etc. Development strategy & pricing: Prominent developer branding expected to bring in goodwill for leasing the building Pricing strategy: Quoted rentals in the CBD region today by Grade A developments is in the range of INR 80 to 88 per sft per month and quoted rentals in the Off-CBD region by Grade A developments is in the range of INR 70 to 75 per sft per month. Based on CBRE on-ground market experience of representing tenants, we understand that rentals mentioned above are quoted in the market, however the transacted rentals are approx. 8-10% lower ~ there is a threshold of INR 80 per sft per month, higher than which closing deals becomes a challenge. However, recent transactions in the CBD region were closed at a range of INR 70 to 80 per sft per month. Therefore, considering the scale of development, it is opined that ~ INR per sft per month can be achieved for the subject property in line with the overall market after pre-leasing for anchor tenants; Further appreciation can be witnessed, post leasing atleast 75% of the overall space CBD market has witnessed minimal rental appreciation over the past 5 years; Rental opinion above refers to current date. Approximately 10-12% appreciation by the time of leasing i.e by 2021 can be witnessed 24 Large floor plates which can be divisible into smaller segments without reducing the efficiency of the development

60 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 59 ~20% of the development should be pre-leased to a large occupier (IT/ ITeS/ Non-IT) at about 15-20% discounted rental in order to reduce risk of marketing a large development in the CBD and secure branding for the development Marketing Timeframe: years Tenant Profile: IT/ ITeS tenants to anchor the development along with Marquee non IT tenants 2. Tourism Hub 25 : Would comprise of real estate components which would act as value add to the main commercial hub. Hospitality, convention space/ auditorium and retail are key components that would add value add to the commercial office space development. The additional components envisaged add tourism value to the development and would also be considered as a differentiated product offering. Typically, many iconic developments across the world have been successful owing to the Tourism Value added by means of providing hospitality, retail & entertainment and leisure components of the development. Being located on Anna Salai, the site has immense potential to support an exemplary iconic structure standing tall that would cater to the captive commerce hub and the region at large. The hospitality development is envisaged is a small mid scale business class hotel ( keys) and the demand for the same can be attracted at multiple levels: Inherent office space demand (Hospitality component as a part of integrated office spaces is established as a successful concept) Demand from the proposed convention center with Tourism positioning Demand for a 3 star category business hotel on account of being centrally located with good connectivity to various urban nodes Scale of development: Base case: Maximum potential of approx mn sft - Subject Site I (South) which admeasures approx. 1.5 acres Components: Hospitality (approx. 130 keys), Convention Center/ auditorium (~1,000 capacity), Restaurants & bar, Rooftop specialty restaurant, etc. Development strategy & pricing: Hotel/ convention center component to be developed in consortium with a 3/ 4 star category hospitality partner. Key demand drivers for this component would be inherently generated and 25 The concept of tourism hub has been arrived at based on benchmarking and CBRE expertise in the field. Components of hospitality and convention center will be studied in detail as a part of the Detailed Feasibility Exercise

61 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 60 also supplemented by the economic activity in the region. Achievable ARR s for the proposed hotel would be in the range of INR 3,750 4,750 with stabilized occupancies of ~65-70% SITE 2 1. Knowledge Hub: The knowledge hub would be positioned at the bottom most portion of the triad s value chain adding the Knowledge Factor to the concept. Further, this would comprise of an incubator / accelerator space which could be one of the kind in the State of Tamil Nadu. This knowledge hub would bring the synergies of the government, educational institutions and the corporates together and lead the way into future innovations and technologies. Knowledge Hub to be modelled on the lines of T Hub in Hyderabad; Metro rail connectivity across the road would act as a major booster for the success of this development. Scale of development: The initial phase of this start up hub ~ 50,000 75,000 sft, with options of scalability in the future - Subject Site II which admeasures approx. 1.8 acres Components: Incubator / accelerator space, co-working / shared working spaces, meeting rooms, open spaces, etc. Development strategy & pricing: The educational infrastructure present in the city / subject region would act as a major driver for this value hub Incubators typically charge a fee for using the real estate space and the support provided; Further, a percentage share on their business operations revenue is also taken. The same could differ from one start-up hub to another Sky Bridge: The sky bridge would connect both the iconic towers at a concourse level retail that could be planned with a Food Hub concept in the lines of Cyber Hub in Gurgaon. It would also add as a design differentiator and help position the development as iconic owing to the concept and design of development. Further, the cost associated with the sky bridge has been considered

62 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 61 B. Product mix recommendation 2: Based on the analysis undertaken in the previous modules of the study, we understand that there is significant and steady for commercial office spaces in the subject region. Further, we understand that the format of spaces range from IT office spaces to corporate offices/ sales offices/ co-working spaces, etc. Therefore, considering the same and the inherent benefits/ inhibitors for the subject site, an Iconic, large commercial office space towers are envisaged on Site 1 segregated as corporate office space with smaller floor plates (north side property) and regular office space tower that can be leased out to IT/ non IT companies. Further, the start up hub concept has been proposed in Site 2. Product Mix Option 2 Source: CBRE; Map for representation purpose only. Figure 17 In the second product mix option, we have recommended that the concept has two different components: SITE 1 1. Commercial Office Space: The commercial office space would comprise of two office towers on either side of Anna Salai. a. The commercial tower on the large land parcel (8.15 acres) has a maximum development potential of approx mn sft. The same could be positioned as world class commercial office tower which could house an array of corporates across various categories. An

63 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 62 opportunity to construct a large scale commercial development would help the iconic development attract IT/ITeS clients, BFSI corporates and other Non IT occupiers who prefer to be located in the CBD but are currently located in the Off CBD or SBD locations owing to lack of scalable options in the CBD. b. The smaller land parcel (1.5 acres) which has a maximum development potential approx mn sft could be positioned as a corporate office tower which would target occupiers who require smaller office spaces ~ corporate offices of local business houses, offices of professions viz. legal practices, chartered accountancy practices, etc., sales offices of national & multinational corporates, front offices of educational institutions, industrial parks, manufacturing facilities, etc. Scale of development: Base case - Maximum potential of approx mn sft Components: Commercial office space, Support services viz. Food court, gym, salon, convenience stores, creche Corporate office space with small scale support amenities and business center facilities Development strategy & pricing: Prominent developer branding expected to bring in goodwill for leasing the building Pricing strategy: Quoted rentals in the CBD region today by Grade A developments is in the range of INR 80 to 88 per sft per month and quoted rentals in the Off-CBD region by Grade A developments is in the range of INR 70 to 75 per sft per month. Based on CBRE on-ground market experience of representing tenants, we understand that rentals mentioned above are quoted in the market, however the transacted rentals are approx. 8-10% lower ~ there is a threshold of INR 80 per sft per month, higher than which closing deals becomes a challenge. However, recent transactions in the CBD region were closed at a range of INR 70 to 80 per sft per month. Therefore, considering the scale of development, it is opined that ~ INR per sft per month can be achieved for the subject property in line with the overall market after pre-leasing for anchor tenants; Further appreciation can be witnessed, post leasing atleast 75% of the overall space CBD market has witnessed minimal rental appreciation over the past 5 years; Rental opinion above refers to current date. Approximately 10-12% appreciation by the time of leasing i.e by 2021 can be witnessed

64 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 63 ~20% of the development should be pre-leased to a large occupier (IT/ ITeS/ Non-IT) at about 15-20% discounted rental in order to reduce risk of marketing a large development in the CBD and secure branding for the development Marketing Timeframe considering towers are being marketed at the same time: years SITE 2 2. Start Up Hub: 26 The start-up hub would comprise of an incubator / accelerator space which could be one of the kind in the State of Tamil Nadu. This should bring the synergies of the government, educational institutions and the corporates together and lead the way into future innovations and technologies. Scale of development: The initial phase of this start up hub ~ 50,000 75,000 sft, with options of scalability in the future - Subject Site II which admeasures approx. 1.8 acres. Components: Incubator / accelerator space, co-working / shared working spaces, meeting rooms, open spaces, etc. Development strategy & pricing: The educational infrastructure present in the city / subject region would act as a major driver for this value hub Incubators typically charge a fee for using the real estate space and the support provided; Further, a percentage share on their business operations revenue is also taken. The same could differ from one start-up hub to another 26 Similar to recommended Option 1

65 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 64 Module 8: Development Option Formats Market practices prevalent are illustrated below: Joint Development In this model of development, the land owner brings in the land as his equity and the developer bring in the cost of construction as his equity. Further, development rights of the property will be given to the Developer. The proceeds from the development are split between the land owner and the developer as per pre-agreed terms based on the valuation of the land and income from the asset. Joint Venture In this model, a Special Purpose Vehicle is formed where the landlord and developer will be equity partners. A percentage split on the rights of the SPV is determined on the percentage of contribution of the partners towards the total project cost (land value + cost of construction). The revenue generated out of the SPV will be shared by the partners based on the rights held by them. Developer Manager Model In this model of development, the land owner holds entire risk of development and the role of the developer is more like a contractor. The developer would work as a vendor and develop, lease and operate the property for which he would be compensated as a percentage share of top line revenues manager fee. Self-Development Model The land owner will bring in and EDC (Engineer Design and Construct) company to do the development. The rights to the development and revenue will solely be enjoyed by the land-owning department. The EDC company would be compensated for his services either based on a percentage on the top line numbers or as a lump sum amount for the services rendered. The raising of funds must be done by the land-owning department. In this method of development, the leasing risk remains with the land owner.

66 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 65 Module 9: SWOT & Conclusion 1. SWOT Analysis A project level SWOT analysis has been conducted to get a full circle perspective of the envisaged development. Strengths: Site: Site 1: Site 2: Scale advantage: Size is approx acres ~ opportunity to introduce a large scale development Contiguity: Non-contiguous land parcel ~ allows for development of two distinguished components which will synergize with each other Frontage and accessibility ~ boosts the visibility of the site o North Site: Enjoys frontage and accessibility along Anna Salai & two other proposed 60 feet roads o South Site: Enjoys frontage and accessibility along Anna Salai Presence of metro ~ at approx. 800m; major advantage Shape: The site is fairly rectangular ~ allows for efficiency in space utilization Contiguity: Site is contiguous in nature Location: Located on Anna Salai which is an established mix use hub comprising of commercial, retail and hospitality ecosystem for commercial office space is currently existent Anna Salai is one of the key arterial roads of the city ~ good connectivity; further, the proposed metro would boost accessibility to the sites Commercial market: Currently garners a 20 25% share in city s commercial office space total supply and absorption Low vacancy levels in the CBD & Off region ~ 14 15% Product mix Option 1: Would act as an integrated economic hub ~ commerce hub, tourism hub & knowledge hub complementing each other Product mix Option 2: Keeping the product mix strictly commercial would aid in positioning the development as a commerce hub

67 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 66 Others: Keeping in perspective the government involvement in the project, we understand that the approval process would be streamlined / faster Further, government support would result in investment attractiveness and reach across various large corporates reduced marketing timeframe Weaknesses: Site 1: Site 2: Shape: Irregular shape of the North side land parcel ~ could hamper development potential Cost involved in site development ~ owing to presence of current structures Requirement to acquire the private property, expansion /development of proposed roads ~ might result in delay of development, increased cost, etc. The Anna Salai corridor has metro connectivity, however, the nearest metro station to the site would be approx. 800 meters away same can be mitigated by providing a walkway from the station to the site (this would have a cost implication) Cost involved in site development ~ owing to presence of current structures Profile of surroundings: Presence of slum developments on one side of the site Product mix Option 1: With the presence of start-up hub, commercial and hospitality components ~ risk of engaging with various operators for each of the components Product mix Option 2: Longer marketing timeframe for the commercial and corporate office tower vis-à-vis product mix 1 Opportunities: Tourism hub would act as a key enabler in increasing recall value ~ helping the development reach an iconic status The start-up hub would be a great way to re-emphasize government branding and impetus on the IT/ITeS industry Large land parcel size provides an opportunity to introduce large scale commercial office supply in the market ~ currently not prevalent in the CBD and off CBD zones Threats: Competition from SBD market as it is increasingly being favored by the IT/ITeS companies Traffic congestion during peak hours would act as a dampener for the development

68 FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB Conclusion The vision for the proposed TN Commerce Hub is enlisted below. The proposed product mix has been designed considering the following: Creating and iconic landmark for the city - Creating an architectural masterpiece ~ which would be An Address to national and international marquee clients across verticals Reinstate Anna Salai and a key node in the CBD region Developing a futuristic project ~ World class amenities and specifications, Certifications, etc. Generate employment, improve visibility and create investment attractiveness for Chennai Utilize metro rail as the Wheels of Change to rejuvenate the CBD area and realize Walk to Work concepts in reality Endorse Brand Tamil Nadu and build on the advantage to develop the project The vision for the envisaged development is to create a landmark for the City and reinstate Anna Salai as a prime commercial location by means of generating economic and social value to the State and set a benchmark for Office Space in the country

69 The critical success factors for the envisaged product mix have been illustrated below: FINAL REPORT PRE-FEASIBILITY FOR TAMIL NADU COMMERCE HUB 68