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Sterling Developers Courting PE To Raise $50M For Two Projects

06 October, 2010

Sterling Developers, one of the oldest real estate firms in Bangalore, is holding talks with private equity investors Mapletree Investments, South Asian Real Estate (SARE) and IREO as it looks to raise around $50 million in multiple projects.

The firm has hit the fund-raising trail to give shape to two significant projects, which could turn to be game-changers for the company, which has remained relatively quiet in a city where younger

firms have drummed up bigger buzz.

The nearly three-decade-old developer, spearheaded by Ramani and Shankar Sastri, is heavily focused on the city’s residential segment, and has a portfolio of five to six million sq ft. Sterling Developers is also a partner in Ramesh Ramanathan-backed Janaadhar Constructions, which is into low-cost housing in the city.

Sterling’s ongoing fundraising is towards two large-scale high-end residential projects coming up closer to Bangalore’s famed IT corridors. Sterling Developers could not be reached for immediate

comments.

The firm is in discussions to raise $20 million in a special purpose vehicle developing a lifestyle villa project, near Bellandur Lake in Bangalore. Anand Jain-managed Urban Infrastructure Opportunity Fund (UIOF) is an investor in this project, which is yet to take off.  One source said, Mapletree, a real estate unit of Singapore state investor Temasek Holdings, and SARE have held discussions regarding a possible investment in this project.

Sterling’s other big residential project, near Whitefield, coming up on a 100-acre land is likely to go in for fresh round of fundraise. Old Lane Partners, a hedge and private equity investor acquired by Citi Alternative Investments in 2007, is an investor in this project along with HDFC Realty Fund. Sources added that Old Lane was seeking to recoup its investment as part of its broader exit strategy.  Hence, a part of the latest fundraising by Sterling could be employed to facilitate Old Lane’s exit.

Sterling’s bets on lifestyle villas and large-scale residential projects in Bangalore’s IT hot spots are in line with what most developers are looking at in the city, which witnessed a crisis in the post 2008 period. During the crisis period, there was a rush to develop smaller ticket-sized homes and prune drawings to bring down costs. Now, with the recovery in the economy and sentiments, the

residential segment, particularly in the mid-to-high-end category (which suffered the most), is beginning to see traction both from developers as well as end users.

Private equity investments in the Indian real estate sector have been showing an uptick of late, especially at the project or SPV level in the residential space. Private equity firms have invested $981 million across 31 real estate deals in this financial years till date, according to VCCEdge. This reporesent a 84% jump in terms of deal as compred to the same period last year.

While low-cost housing has been the buzz among investors and developers, big luxury projects in the residential segment have also attracted PE attention. Real estate firm Lodha Developers raised Rs 500 crore for a 10% stake in a project to develop a 117-storey residential tower in Mumbai to HDFC Venture Funds.


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Sterling Developers Courting PE To Raise $50M For Two Projects

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