DLF, the country’s largest property developer, is all set to float SEZ owning group firm DLF Assets (DAL) as a real estate investment trust (REIT) in Singapore. This follows the closure of a group integration plan under which DLF, the flagship group firm, has indirectly acquired DAL, a promoter owned entity. The deal comes as a natural follow-up of the promoters buying out hedge fund DE Shaw’s stake in DAL for around $500 million late last year.
As per the deal that was completed last Friday, the commercial rental business of DLF -- DLF Cyber City Developers Ltd has been merged with Caraf Builders & Constructions Pvt. Ltd, the promoters’ holding company of DAL. DLF will own around 60% of the merged entity that would in turn own the assets of DAL.
The transaction has brought all commercial assets of DLF under one company giving the parent listed firm a revenue stream of around Rs 2,500 crore annually that would help it hedge against the uncertainties of the property market.
Caraf has four rent yielding properties with leased area of over 3 million sq ft besides 96% economic interest in DAL which, in turn, has four SEZ properties with leased area of over 6 million sq ft. DLF Cyber City has commercial buildings with leased area of close to 7 million sq ft besides two malls in Gurgaon and Delhi.
Kotak Mahindra Capital and Enam Securities were the advisors and independent valuers in the transaction. Citigroup provided a fairness opinion to the deal. Amarchand & Mangaldas & Suresh A Shroff & Co and Fox Mandal Little were legal advisors to the special committee formed for the transaction. BMR & Associates and KPMG were the tax advisors to the deal and Cushman & Wakefield were the property consultants.
The transaction is a prelude to the REIT listing of DAL’s office trust in Singapore. DAL’s proposed REIT listing has been pending for over two years now and the company could be looking to raise around $1.5 billion (Rs 7,000 crore). The fund raised would be used to retire debt of DAL.