DLF Ltd, the country’s largest realty firm by market capitalization, has disclosed that it has struck a deal to sell its 17-acre plot in Mumbai to Lodha Developers in a deal worth Rs 2,700 crore ($488 million), which would help the realtor to deleverage its debt heavy balance sheet.
The deal, which involves DLF and its other group firms selling their entire holding in Jawala Real Estate Pvt. Ltd, is one of the largest real estate transactions in recent times. The completion is expected by the end of October 2012.
VCCircle had first reported that DLF is close to a deal to sell the asset to a consortium led by Lodha for Rs 2,700 crore. Separately, we also reported last month that the deal has been inked and its closure is expected by October.
Abhisheck Lodha, managing director, Lodha Group, said, “We will develop a 5 million square feet mixed use development on the land and it will be launched in next six months. Bulk of it will comprise the residential component.”
In effect, privately led Lodha Developers is paying around Rs 5,400 per squre feet (of developable area) for the land parcel in Worli, where prices of developed properties hover around Rs 30,000 per square feet.
DLF had acquired the land parcel for just Rs 702 crore seven years back in an auction by National Textile Corporation (NTC), in what was the biggest land transaction at that point of time. NTC has sold vast tracks of land in Mumbai, which were vacant property from defunct textile mills.
Lodha will pay Rs 1,200 crore for purchase of equity and debentures from DLF (of which it has already paid Rs 500 crore) and it will make the rest of the payment by October 15. In addition, Lodha is also expected to take over about Rs 1,500 crore of liabilities that Jawala has incurred for the development since it purchased the property from NTC in 2005.
Abhisheck Lodha said, “We will either refinance or continue to hold the debt. DLF had made 2-3 floors, designs etc in last seven years on it. The floor space index (FSI) on the project is less than 4.”
The Mumbai-based developer, who has been on a land buying spree for last two years in the Lower Parel area, will look to bring in a private equity player.
Lodha says, “We might bring in one private equity player but everything is on an initial stage, we will raise a small amount not more than Rs 500 crore from the fund.”
The transaction has been consummated after over 9 months of active negotiations between the two parties. Other large real estate players including Oberoi Realty and Runwal Group had also put in their bids for the property, but were pipped by Lodha.
In FY 12, Lodha achieved Rs 5,000 crore in sales, delivered 3 million square feet of area and spent over Rs 1,600 crore for construction. The firm which has 2,800 employees and 34 million square feet under construction, has been one of the most active real estate buyers in the country.
Lodha said: “Real estate in Mumbai will see a strong uptrend from 2014 onwards and we think that the next 12 months are a great time for end users to buy good quality homes and offices at reasonable valuations.”
(Edited by Prem Udayabhanu)