Global private equity house Apollo Management LP may assume control of about seven to eight investments of Citi Property Investors (CPI) in India, on which it is currently holding due diligence. Apollo is in advanced negotiations to take over Citigroup's real estate unit, CPI, with assets worth over $12.5 billion under management globally.
In India, this could see some of CPI's key investments passing over to Apollo giving the latter a fairly well-spread real estate portfolio to start with. Among the marquee investments of CPI are $55 million investment in Nitesh Estates, its multiple investments worth over $200 million in New Delhi-based BPTP, $20 million in True Value Homes in Chennai and another $50 million commitment into Gera Developments in Pune.
A Citigroup India spokesperson offered no comment, when contacted.
Meanwhile, Citigroup has been trying to offload some of its structured finance deals with a few domestic real estate firms like Golden Gate Properties Ltd in Bangalore, independently. Also Citigroup Venture Capital International's real estate investments like Emaar MGF will not be a part of this deal.
Apollo is expected to take over 74% CPI stake in a JV with Nitesh Estates, which is developing India's first Ritz Carlton hotel in Bangalore. Incidentally, Nitesh, which has the option of buying back a part of the stake from Citi at a later date, is in the midst of Rs 550-crore IPO roadshow currently. Though CPI had originally committed $360 million investment to various projects of Nitesh Estates, it deferred the rest last year and only went ahead with Ritz Carlton deal.
Most of CPI's investments are at project level barring its 5.89% stake at the parent entity of BPTP.
The acquisition of CPI will could also give New York-based Apollo access to investments across Asia. CPI closed CPI Capital Partners Asia Pacific, LP in February 2007 with commitments totaling $1.29 billion. This fund has a primary focus in Greater China and India.
Apollo recently made its debut private equity deal in India by investing $100 million in direct to home satellite TV company Dish TV. Apollo Management's affiliate, Apollo Real Estate Advisors, already runs a $650-million real estate private equity fund in India in partnership with Delhi-based Khemka family's SUN group. But Citi Property Investor's assets are expected to come directly to Apollo, which would give it a direct presence in the Indian real estate market. The deal, being done at a global level for which the interim agreement has been signed, is expected to unveiled in a month's time.
An email sent to Apollo's India chief Mintoo Bhandari for comments did not elicit any response.
The deal is part of Citi's efforts to raise funds from selling assets. Citigroup's arms have also recently exited investments in India’s largest commodity exchange Multi Commodity Exchange of India and telecom tower arm of Bharti Airtel.
Last year CPI promoted its India head, Ravi Hansoty, as the interim head of its pan-Asian real estate platform the Asia head David Schaefer moved out.
By far, CPI's largest exposure is to BPTP, where it picked up a 5.89% stake in the entity for Rs 322 crore ($80 million) in August 2007. Subsequently it also picked up stakes in three associate companies and subsidiary of BPTP for another Rs 399 crore ($99 million) in April 2008. The fate of the entity level investment remains to be seen as BPTP recently said is planning to go for a Rs 1500 crore public offering early next fiscal.
It also has an investment in TVH Estates Chennai Pvt Ltd, a Rs 700-crore residential project near Chennai developed by construction firm True Value Homes. The developer is believed to have the right to buyback CPI's investment in the project. CPI also has a 50:50 joint venture with the Gera Developments for a residential project in Pune.
Clarification: Apollo Real Estate Advisors is now known as AREA Property Partners and has no affiliation with Apollo Global Management. AREA’s name change and formal separation from Apollo Management were implemented in 2009.