Blackstone Group, Brookfield Asset Management eye Kotak Realty assets

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Mumbai: Kotak Realty Fund is in talks with US-based Blackstone Group LP and two Canadian entities to sell assets from two real estate funds raised in 2007, two people aware of the development said on condition of anonymity.

The Canadian entities are Brookfield Asset Management Inc. and the Canadian Pension Plan Investment Board (CPPIB).

Kotak Realty Fund, a part of Kotak Investment Advisors Ltd (KIAL), has four separate special purpose vehicles that hold stakes in residential projects in Chennai and Gurugram that were acquired by its vintage funds in 2007.

The vintage funds include Kotak Alternate Opportunities India Fund worth $331 million and Kotak India Realty Fund worth $265 million. Kotak India Realty Fund was Kotak’s first real estate offshore fund. More than 60% of the investments made from the offshore fund have been sold.

Kotak has hired Jones Lang LaSalle (JLL) India to advise it on the sale process, said the second person. The deal value is not yet known. “The sale process has been started and the discussions with the global funds are at initial stages,” said one of the two people cited above.

The projects that are on the block include residential township project Astaire Gardens in Gurugram, developed by BPTP Ltd, where Kotak India Realty Fund invested about Rs170 crore.

The others are Bengaluru-based DivyaSree Developers Pvt. Ltd’s 140-acre residential township project in Chennai; Aavisa, an integrated township project being developed by IVRCL Assets and Holdings Ltd in Sriperumbudur, TamilNadu; and residential units on a 20-acre plot off Chennai’s Old Mahabalipuram road.

Spokespersons from Blackstone, CPPIB and Kotak Realty Fund declined to comment. Mails sent to spokespersons at Brookfield and JLL went unanswered.

A couple of real estate funds are on the exit mode, seeking to sell investments made in 2005-07.

IL&FS Investment Managers Ltd (IIML), a unit of Infrastructure Leasing and Financial Services Ltd (IL&FS), is in talks with funds such as Blackstone to sell its IL&FS India Realty Fund I, Mint reported in July.

One of India’s first real estate-focused funds, IL&FS India Realty Fund I was launched in 2005 and owned 17 investments, of which it has exited six.

Blackstone is set to acquire Urban Infrastructure Opportunities Fund, which counts Reliance Industries Ltd as a key investor, for nearly Rs800 crore, The Economic Times reported last month. Urban Infrastructure Opportunities Fund was launched in 2006 and raised about Rs2,200 crore, it said.

“Acquisition, approval, development and marketing of real estate assets are full of challenges in India. Several large investors have already consolidated the market and the quality assets are increasingly hard to get, visible from compression of yields,” said Sanjay Dutt, chief executive of India operations at Ascendas-Singbridge India, the local arm of business space solutions provider Ascendas-Singbridge Group.

At the same time, there is sovereign as well as private capital seeking safe and sanitized assets or projects, having gone through due diligence.

Set up in 2005, Kotak Realty has raised $1.47 billion till date, invested in 40 projects and financed over 65 million sq. ft of residential development and 6 million sq. ft of commercial development.

Kotak Realty Fund has generated exits of over $604 million and returned the principal amount in three out of four domestic funds—KIREF-I ($70 million, vintage 2006), KIREF IV & V ($74 million, vintage 2011), according to the company website.

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