New Delhi, June 4 -- ICICI Prudential Alternate Investments, the alternatives arm of ICICI Prudential Asset Management Company, is preparing to launch a new fund focussed on the country's office market as its current scheme nears full deployment, a top company executive told VCCircle.

The firm, which is currently closing deals from the ICICI Prudential Office Yield Optimiser Fund AIF II, is planning to launch the third fund in the series, ICICI Prudential Office Yield Optimiser Fund AIF III, with a target corpus of Rs 4,000-5,000 crore ($417-522 million).

The proposed fund would be 60-100% larger than the Rs 2,500-crore Optimiser II.

"Due to high interest, the AMC is already planning Optimizer III, which is expected to be a larger fund of Rs 4,000-5,000 crore," said Rohit Rathi, principal, real estate business at ICICI Prudential AMC. "The fund is expected to be launched in around two-three months, specifically after the current office fund is formally closed."

The firm has already filed an application for the new fund as it prepares to transition from Fund II, Rathi added.

The new fund will follow the broader strategy of its predecessors, taking exposure in fully leased, completed, and stabilized commercial assets, to generate regular rental yields and upside.

"By avoiding under-construction or greenfield risks, the fund seeks better risk-adjusted returns. By targeting fully completed, stabilized, and 100% leased commercial buildings, we are offering investors a regular rental yield plus upside from escalations. Our aim is to position the fund as a stable alternative to debt investments, as these assets are not subject to daily mark-to-market fluctuations like the equity market," Rathi said.

Recent acquisitions

The firm has recently closed back-to-back deals in the office space through Optimiser II.

It acquired nine floors in VIOS Towers in Mumbai's Wadala for Rs 525 crore. Previously, it had acquired RMZ Edge in Pune and EcoWorld 21 in Bengaluru for a total Rs 2,600 crore. It also bought Aditya Shagun IT Park in Pune for Rs 520 crore.

"The Office Asset Optimizer Fund II is a Rs 2,500 crore fund that is expected to close formally within the next two-three months. It is already 80% called and nearing full deployment, with a pipeline in place to sign term sheets for the remaining corpus. To date, the fund has concluded seven deals across Mumbai, Bengaluru, and Pune," said Rathi.

While the fund's size is Rs 2,500 crore, it also brings in co-investors for some deals, taking total deployment significantly higher.

On fundraising, Rathi said demand for AIF products remains strong in the domestic market, helping the firm raise capital from domestic institutions, high-net-worth individuals (HNIs) and family offices. "The investor base for these funds is primarily domestic, including insurance companies, large family offices, and ultra-HNIs. While the AMC is open to offshore global money and has existing partnerships across various geographies, the current focus remains on the strong, fast-closing domestic demand," Rathi added.

Residential strategy

The firm recently launched a residential-focussed fund with a base size of Rs 1,000 crore and a greenshoe option of Rs 1,000 crore, as reported by VCCircle.

The fund, ICICI Prudential Real Estate Development Fund, will focus on residential developments in Mumbai, particularly society redevelopments. The strategy involves partnering with four large developers to execute 8-10 projects under the platform.

"The focus is on mid-sized projects in good locations with strong connectivity and a lifecycle of four-six years. By completing the entry and exit within this timeframe, the fund aims to avoid exposure to typical real estate cycles. Unlike a debt fund, this is a surplus-sharing or equity-style instrument where returns are linked to project surpluses," Rathi said.

The firm has already raised a substantial portion of the corpus and aims to fully deploy the fund over the next 12-18 months.

Business overview

While the investment firm has launched and exited several funds across residential and commercial segments over the years, it currently manages two office-focussed funds, ICICI Prudential Office Yield Optimiser Funds I and II, alongside the Residential Real Estate Development Fund.

ICICI Prudential Asset Management Company, a joint venture between ICICI Bank and Prudential Corporation Holdings Ltd, offers mutual funds, portfolio management services (PMS), AIFs, and advisory mandates for international clients. The firm manages over Rs 9.8 lakh crore in mutual fund assets and over Rs 42,800 crore in alternative investments.

Last year, ICICI Prudential AMC acquired the private equity, venture capital, and real estate fund management business of group company ICICI Venture. The company was also listed on stock exchanges later in the year, becoming one of the most valuable financial services firms in the country.

Published by HT Digital Content Services with permission from VC Circle.