Bangalore-based private equity firm Azure Capital Advisors Ltd is planning to raise two new funds dedicated to the real estate space, a top company executive told VCCircle. One of these will be a rental yield fund while the other will be a development fund, looking to invest in South and West India with a focus on Mumbai redevelopment projects.
The rental yield fund, called India Realty Fund II, will be the second fund from Azure’s stable and the firm is planning to raise Rs 150 crore for the same, with a greenshoe option of additional Rs 150 crore. It will be filing with the Securities and Exchange Board of India (SEBI) within the next three weeks and may seal a first close after raising Rs 30-40 crore. The fund will look to invest in Mumbai, Pune, Bangalore and Chennai, and will target commercial properties close to central business districts (CBDs).
Shailesh Ghorpade, managing director and CEO of the Azure, told VCCircle that it would first raise the rental yield fund, which would be a development fund as well. “It will be a regular source of income for our investors as we will not block any money for 5-6 years,” he added.
As much as 70 per cent of this fund will be invested in commercial Class A tenants, with a monthly or quarterly payout, and the rest of the money will be allocated for last-mile funding in projects where developers are stuck. “There are a lot of projects where developers are struggling to close them. So we will come in and invest in those projects. We are targeting an average investment of Rs 25-30 crore per project and expecting returns of 15 per cent,” said Ghorpade.
After its launch, Azure Capital planned to raise close to Rs 500 crore and wanted to tap the redevelopment projects in Mumbai by doubling up as a developer. However, the initiative never took off as it could raise only Rs 50 crore under India Realty Fund I. The firm has now decided to make a comeback in the same segment, but this time with an experienced real estate developer as its partner. This new fund is also looking at other projects in South and West India besides Mumbai redevelopment.
“For the development fund, we are tying up with a partner. We are going to sign a Memorandum of Understanding (MoU) with a developer who has a project execution record of 7 million sq. ft. and has been in the industry for last 15-16 years,” detailed Ghorpade. “We are pursuing 3-4 projects and for this fund, too, we are planning to raise a total Rs 300 crore – Rs 150 crore and a greenshoe option of another Rs 150 crore.”
Azure has invested in two projects from its first fund IRF I – one in Bangalore and the other in Gujarat. The Bangalore project is for 20 acre of villa development and in Gujarat, it has invested in a plotted development located on the Delhi-Mumbai industrial corridor.