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Brookfield buying Unitech Group’s stake in string of IT parks for over $347M

12 June, 2014

Unitech Corporate Parks (UCP), the AIM-listed India-focused real estate investment firm which has half a dozen IT parks as assets in India along with Unitech Ltd, has signed a deal to sell its majority stake in all the projects to Brookfield Property Partners for £205.9 million (Rs 2,049 crore or $347 million), as per a  stock market disclosure.

Unitech Ltd has separately disclosed that it is selling its stake in four of the six projects for an undisclosed amount. But given the deal value with UCP, Brookfield has valued the whole asset at around Rs 3,415 crore or $578 million. This makes it is one of the largest ever real estate deals in the country.

Unitech, the second-largest realtor in the country by market capitalisation, would encash under Rs 1,300 crore as part of the latest stake sale. It owns 40 per cent in five of these six projects and 36 per cent in the sixth property in Kolkata with the remaining 4 per cent held by another shareholder.

The JV involved six IT Parks of which three are located in Noida, two in Gurgaon and one in Kolkata.

VCCircle had first reported in February that the deal could be worth over $500 million. Earlier the group was looking to sell only one big asset in Gurgaon but later expanded the proposed asset sale to include all.

Donald Lake, chairman of UCP, said, “The offer for UCP’s property interests from Brookfield at above the latest book valuation reflects the hard work put in over recent years to let the office space and grow income, in order to achieve the best possible price on behalf of investors in the company. The independent directors believe that the proposed sale represents a very attractive opportunity for investors to realise strong value from the properties and facilitate a distribution of the proceeds, and I urge all shareholders to vote in favour of the resolutions proposed at the Extraordinary General Meeting.”

Unitech separately said, “The interest of two of the affiliates of Unitech in four of these six IT SEZ/parks stands transferred to an independent third party. These four SEZs are the most mature in terms of their development status.” It did not name the buyer but UCP said Brookfield has acquired this stake.

Unitech scrip crashed over 7 per cent to close at Rs 33.95 a share on the BSE in a weak Mumbai market on Wednesday.

UCP is the London-listed affiliate of Unitech. Post the deal it plans to return the money to its shareholders and thereafter wind up the firm.

Earlier in April it had disclosed that it has been approached by an unnamed buyer to acquire its entire portfolio held through wholly owned subsidiary Candor Investments Limited, the holding company for its interests in its six real estate developments. The firm had said the separate discussion in relation to the sale of one of the key assets, named G2 located in Gurgaon, has been suspended.

UCP’s total portfolio is to build over 21 million sq ft of commercial assets of which it has developed around 

one-third. The company had hired Jones Lang LaSalle India to sell the G2 asset located in Gurgaon. However, as first reported by VCCircle, this had got stuck due to disagreements with a third-party firm which is the actual land owner in the project.

Earlier, Blackstone was said to be a front-runner to strike the deal for G2.

In another large deal a joint venture between southern realty major Embassy Group and Blackstone acquired majority stake in Vrindavan Tech Village (VTV), a large business park in Bangalore, from three of the four stakeholders. The deal was struck last year and completed recently at an enterprise value of Rs 1,951 crore ($324 million), including debt.

The Unitech deal trumps this transaction in terms of size and even though there have been a few larger PE deals in the realty sector in India in the past in dollar terms, this transaction by far is the biggest deal in local currency factoring in the overall transaction including stake sale by Unitech.

In another large transaction, in 2012 Lodha Group bought a prime property in Mumbai from DLF for an enterprise value of Rs 2,700 crore ($488 million then).

Brookfield

The stake in Unitech Group’s projects has been acquired by Canadian asset management company Brookfield Asset Management for an undisclosed stake. Brookfield Asset Management is an associate of Brookfield Strategic Real Estate Partners, a $4.4 billion global real estate fund.

Brookfield already has a presence in India through a JV with Peninsula Land, the realty arm of Ashok Piramal Group, under Peninsula Brookfield Investment Managers. As first reported by VCCircle early this year, it has struck a deal recently to separately manage AIG Global Real Estate’s India investments.

AIG Global Real Estate comprises a group of international companies within US insurance and asset management giant AIG that invests in and actively manages $8.4 billion of real estate for clients and AIG companies in various countries. It is headquartered in New York with several regional offices, including Atlanta, London, Mexico City, Moscow, Mumbai, San Francisco and Seoul.

Within its Asia real estate portfolio, in December 2010 it had sold management of several funds to Invesco. Most of these were Japanese funds. As of now if it has under its management three Asian funds, including one country specific fund each for South Korea and India.

AIG Real Estate Opportunity – India, L.P. or its Indian Fund is focused on the development of office, retail, industrial, hospitality and residential projects in targeted areas in India. The India fund had a final closing in June 2008 with total capital commitments of $282 million.

It had invested the bulk of this money during 2007-09 and has already exited a few projects. In January it bought out its Bangalore-based joint venture developer partner RMZ from its Hyderabad project. The fund has been looking for exits from its other projects.

The fund has been separately looking to do co-investments and investments through subscription to non-convertible debentures.

Early last year, it saw a key exit in the form of Nitin Goel, who moved on to Milestone Capital as partner for real estate investments. Goel was co-fund manager at AIG Global Real Estate since 2007.

(Edited by Joby Puthuparampil Johnson)


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Brookfield buying Unitech Group’s stake in string of IT parks for over $347M

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