DLF, the country’s largest property developer, is indirectly acquiring DLF Assets Ltd (DAL), a promoter owned entity. The deal comes as a natural follow-up of the promoters reportedly buying out hedge fund DE Shaw’s stake in DAL for around $500 million. Now the deal opens the possibility of DAL going ahead with a real estate investment trust (REIT) listing in Singapore that has been pending for over two years now to raise around $1.5 billion (Rs 7,000 crore).
As per the deal, the commercial rental business of DLF– DLF Cyber City Developers Ltd is being 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 proposed transaction will bring all commercial assets of DLF under one company giving the parent listed firm a revenue stream of around Rs 2,500 crore annually and 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. The fund raised there would be used to retire debt of DAL. DLF share price opened marginally down at Rs 379 on Wednesday. The stock’s been trading flat after hitting its 52 week high in late October and has dropped 22% since then.