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PE Players In Realty SPVs See Busy Exit Season

14 October, 2010

It is exit season for private equity investors in the realty space. With a smart recovery in the Indian realty sector and an impressive lineup of public offers, investors are getting to see the face of money. Significantly, investors at the project or SPV level are up for a busy exit season given the increasing demand for residential and commercial space.

According to Amit Goenka, national director, capital transactions, Knight Frank, “There are many exits planned at the project level by the end of this year.” However, he says, private equity exits at the enterprise level will be a significant challenge. “I don’t think all the real estate players who filed DRHP can float IPO this year.”

Consider this: Red Fort is exiting more than five deals. In the residential space, Red Fort has sold over 5,000 apartments in Tier 1 cities such as Chennai, Bangalore, Delhi, NCR. Kotak Realty Funds Group  is planning complete exits from two of its IT Park investments – Peepal Tree Properties, a green field IT park building in Mumbai and Green Boulevard, a project in Noida IT Park, Delhi. Indiareit Fund Advisors is eyeing five partial exits this year from its large portfolio of residential projects. It plans to exit from Neptune Developers, and other projects such as Skyline (Bangalore), Samira (Mumbai) and SSPDL Northwood (Hyderabad) this year. It made a partial exit of Rs 49 crore from Aristo (Mumbai) in April, where it invested Rs 150 crore.  

Raj S. Inamdar, Principal, Red Fort Capital told VCCircle, “We have been liquidating and exiting investments since 2009, in both the residential and office sectors. Overall, we have witnessed strong demand for value-oriented residential housing across India. India’s robust long-term fundamentals have supported the residential sector (including sustained GDP growth, increasing incomes, rising urbanization, youthful demographics, high savings rates and low consumer leverage levels). We are seeing sustained demand for well-conceived office projects with strong connectivity, convenient amenities and established neighborhoods.”

According to VCCedge data, till date in 2010, five exits worth $1.58 billion took place through buybacks compared to just a single instance in 2009, a period when the realty sector was bruised and battered in the aftermath of the global economic slowdown. 

Data shows, 2010 witnessed exits deals such as CVCI-Emaar MGF Land Ltd ($60 million), WDC Ventures-Vijay Associates Constructions Pvt. Ltd. ($40 million), Symphony Capital Partners-DLF Assets Ltd ($694 million), Siva Ventures Ltd-Aamby Valley Ltd ($323 million).

DE Shaw Composite Investments (Mauritius) Ltd. exited from DLF Assets Pvt. Ltd. for $470 million (Rs 2200 crore) by selling its entire stake to Rajiv Singh, Vice Chairman, DLF last year.

In July 2010, private equity major Citi Venture Capital International (CVCI) exited its investment by selling the stake in Emaar MGF Land Ltd–a joint venture between Emaar Properties PJSC of Dubai and MGF Development Limited — back to the promoters. Following the close of the put option date (June 30, 2010), CVCI had exited above 1% stake for about $60 million which CVCI acquired at a price of Rs 1557.84 per share for $50.98 million (Rs 227 crore) in 2006. Emaar MGF filed DRHP for raising about Rs 1,600 crore through proposed IPO.

In April 2010, Och-Ziff Capital Management Group LLC, which had invested in Bangalore-based Nitesh Estates, sold 17 million shares representing 24.3% stake at a price of Rs 115 per share for total proceeds of $40.61 million (Rs 195 crore) through its IPO.

Two months back, Entertainment World Developers (EWDL) filed its Draft Red Herring Prospectus (DRHP) with SEBI for floating an IPO in the size of Rs 400-600 crore. The company is backed by investors and equity partners such as ICICI Venture, Phoenix Mills Ltd, MPC Synergy, Yatra Capital, Eredene Capital Plc, investment firm Sapphire, Edelweiss Capital, Kshitij Venture Capital Fund, Landmark Dalmia Group and Biltech Engineers.

Mumbai-based realty firm-Neptune Developers has also filed DRHP with SEBI to raise about Rs 500 crore. Indiareit Fund Advisors, promoted by the Piramal Group, is likely to exit from Neptune through the IPO.

Bangalore-based Prestige Estate Projects Ltd is likely to raise Rs 1200 crore in its IPO which is currently open for subscription. Red Fort India Real Estate I LP, a fund managed by Red Fort Capital, had invested $22 million in a commercial project developed by Prestige.

Through open market, about 5 exits worth $41 million took place since 2008. The deals include Trikona Trinity Capital’s sell out of DB Hospitality Pvt. Ltd ($22 million), Trikona Trinity’s exit from Phoenix Mills Ltd. ($7 million), Orient Global Cinnamon Capital’s exit from Anant Raj Industries Ltd. ($12.28 million) and Leverage India Fund’s exits from Gayatri Projects Ltd.

According to VCCEdge data, about 86 PE deals took place in the real estate sector since 2000 with a total value of $3.8 billion. This year, the major investment was made by Temasek in Sobha Developers worth $20.5 million. Till date, about 11 deals took place worth $185 million in real estate sector this year.


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PE Players In Realty SPVs See Busy Exit Season

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