Big PEs in talks to buy Essar realty arm's Mumbai project

Source : BUSINESS_STANDARD
By : Raghavendra Kamath
Last Updated: Fri, Apr 20, 2012 19:33 hrs

Leading private equity (PE) funds such as Blackstone, Morgan Stanley, IDFC, and Singapore-based developer-investors Ascendas and Mapletree, among others, have put in bids for the Essar Group-backed Equinox Realty’s commercial project here.

Equinox Realty was seeking a valuation of around Rs 2,000 crore, said sources in the know. If a transaction materialises at this value, it would be one of the biggest PE deals in commercial property. Recently, Ascendas bought a property in Hyderabad from Phoenix Infocity for Rs 855 crore and Blackstone struck a deal for DLF’s special economic zone (SEZ) in Pune for Rs 810 crore.

“The funds have shown interest in the project. Now, the company has to take direction from the Essar family, negotiate with funds and close it. It will take at least three months,” said a person aware of the talks.

The project, Equinox Business Park, is located off the Bandra Kurla Complex. With a development space of 1.2 million sq ft, it is one of the largest campuses in the area. While three towers in the building are operational, the fourth is expected to be completed in six months.

Cherag Ramakrishnan, chief executive officer of Equinox Realty, declined to comment on the matter. Comments from a Morgan Stanley spokesperson could not be had and a senior Blackstone executive refused to talk on the matter. A Mapletree spokesperson also declined to comment. An email to Ascendas elicited no response.

“For Essar, it is a non-core asset. Funds are showing interest as it is half-rented and has a huge potential, located very close to the Bandra Kurla Complex,” said a senior executive who has tracked the deal. Essar had bought this property from the Ashok Piramal Group’s Peninsula Land for Rs 1,100 crore in 2007.

According to market sources, most of the big funds such as Blacktsone, Morgan Stanley and IDFC are looking at commercial properties due to stabler returns and lower associated risks.

“If you enter with a 11 per cent yield, with a 15 per cent escalation you can easily make a return of 18 to 19 per cent. They think it is better than taking development risks in residential projects and giving 24 to 25 per cent returns to investors,” said a global property consultancy’s capital transaction head.

Equinox Realty, headquartered in this city, started the business in 2007. It has a portfolio of nearly 16 million sq ft, under various stages of development.




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