Phoenix Mills Ltd (PML), a Mumbai-based property developer, is buying out Kshitij Venture Capital Fund’s (Kshitij VC) investment in its Chennai market city project and a separate high-end residential development for Rs 106 crore ($21 million), sources have told VCCircle.

PML has approved the proposed acquisition of Kshitij VC’s holding in Classic Mall Development Co Pvt Ltd and Classic Housing Projects Pvt Ltd. The mall has a leasable space of 0.9 million sq. ft. and the residential project has a saleable area of approximately 0.25 million sq. ft. The retail mall is expected to start operations this year. PML has launched 0.25 million sq. ft. of residential space in Chennai of which 0.17 million sq. ft. has already been sold.

Kshitij VC holds 32 per cent each in both the companies and PML is buying out the entire stake from the private equity fund, promoted by retail major Kishore Biyani’s Future Group.

PML will shell out Rs 94.9 crore for the Classic Mall stake and Rs 11.1 crore for the residential development. PML is required to pay off Rs 30 crore within three months and the remaining Rs 76 crore at the end of 15 months from the date of execution of the transaction agreement.

Kshitij’s share will be placed in an escrow amount and transferred to PML upon completion of payments at the end of the 15 months. On completion of the transaction, both will become subsidiaries of PML.

“We have substantial cash in our balance sheet to pay for the initial amount. We are well-placed in terms of cash,” an official of Phoenix Mills said on condition of anonymity.

In August last year, PML provided exit to HBS Realtors Pvt Ltd by acquiring the entire 8.6 per cent stake in its market-city development in Bangalore.

PML is developing a total of four market cities in Pune, Bangalore, Chennai and Mumbai, which include retail, commercial office space, hotel and residential portfolio.

Phoenix Market City in Pune has a debt burden of Rs 475 crore while the Mumbai project has debt of Rs 525 crore. Bangalore and Chennai projects have a debt burden of Rs 300 crore and Rs 275 crore, respectively.

According to a research report by brokerage firm Motilal Oswal, “The management expects further Rs100-150 crore of debt addition over Q4 FY12, before debt peaks out. The ongoing and planned monetisation of the second phase of market city would be the key driver of debt reduction, subsequently.”

The consolidated gross debt of PML has increased to Rs 1,460 crore.

PML plans to make foray into real estate development in eight cities including Mumbai, Bangalore, Chennai, Pune, Raipur, Agra and Indore, measuring a total development area of 214 lakh sq. ft.

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