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Alok Industries makes costly realty exit

Source : BUSINESS_STANDARD
Last Updated: Mon, Dec 10, 2012 03:54 hrs

pTextile major Alok Industries has exited for a loss its five-year-old real estate investment in an office building at the Lower Parel area of this cityppThe company has sold 615000 sq ft of area in Tower B of the Peninsula Business Park building at an average of Rs 16750 a sq ft or Rs 1030 crore said an executive This is a loss of Rs 25 crore In 2007 the company bought this property from Peninsula Land for Rs 1055 crore or Rs 17154 per sq ftppThe company sold the entire space in two tranches&mdash315000 sq ft earlier this year and 300000 sq ft recently the sources saidppBesides selling one floor to finance services company SICOM it sold space to several banks and financial institutions in the Peninsula Business Park the executive saidpp&ldquoI think the times were wrong If the times were correct we would have made better gains from the project&rdquo said a senior executive in the companyppReal estate consultants agree &ldquoWhen they bought into the project the price could have been Rs 17000 a sq ft and they must have expected significant upside That did not happen In hindsight the timing was wrong and the markets tanked&rdquo said Raja Seetharaman managing director of Aperon Realty a realty consultantppAccording to global property consultant Knight Frank transaction activity in Mumbai&rsquos commercial office properties fell nearly 23 per cent in the second quarter of the current financial year compared to the same quarter last year and by 19 per cent compared to the preceding quarter Office rents and capital values have declined in Lower Parel by 11 per cent and eight per cent respectively in the past year according to a recent report by BNP ParibasTwo years after it entered the real estate segment in 2009 Alok said it wanted to exit the real estate business and concentrate on its core textile businessppAs the company ventured into the real estate and retail segments aggressively its debt doubled to nearly Rs 13000 crore in 2012 from Rs 6500 crore in 2009 It started selling realty assets exited from a UK retail venture and loss-making stores of its H&A brand to reduce debtpp"We have decided to keep selling our projects as they get completed floor by floor and bring back the investment into our core business which can be used to pay our existing debt as well as to Peninsula" Sunil Khandelwal chief financial officer Alok Industries told Business Standard in 2009ppAlok has also sold 60000 sq ft of space in the nearby office project Ashford Centre in Lower Parel for Rs 129 crore or Rs 21500 a sq ft to various financial institutions the compay executive said&ldquoIf you look at the sale of both our investments in Peninsula and Ashford we have made Rs 1200 crore&rdquo he addedppThe company made profits of Rs 700 crore by selling apartments in its projects at the Nahur and Breach Candy areas of Mumbai he saidp

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