Swiss investment banking giant UBS and Indian real estate developer K Raheja Corp are stepping up the gas on their private equity real estate joint venture. The equal joint venture, with estimated commitments of up to $200 million, is now scouting for deals in the market almost two years after the announcement.
The JV, which is yet to be named, is spearheaded by former Citigroup honcho Nimesh Grover and operates out of Raheja Corp’s corporate headquarters in Mumbai. The JV is on the prowl for “opportunistic acquisitions” with particular focus on distressed investments across all real estate segments.
This could also be the first private equity play in India for UBS, which has been an active player in the Indian investment
banking space. The JV would prefer majority stake in investments with control over development rights, whether greenfield or brownfield. It is not a coincidence that the JV is getting active at a time when dealmaking is once again picking up in real estate, especially with several private developers looking at fresh funding avenues.
Since October 2009 till March 23 2010, private equity funds have invested $518 million across 22 deals in real estate, according to VCCEdge, the financial research platform of VCCircle. This as compared to $339 million invested across 12 deals in the six month period between October 2008 to March 2009.
UBS also has similar joint ventures in other Asian markets like China, where it has tied up with Shanghai-listed developer Gemdale Corporation to raise a fund. It also has a real estate investment JV with Mitsubishi Corporation in Japan. UBS does not comment on market speculation or rumour, said Mark Panday, a UBS spokesman based in Hong Kong, when contacted by VCCircle.
The Indian JV is prospecting multiple deals in the southern real estate markets, including takeover of some mid-market hospitality assets.
While it has a small team, the JV will leverage heavily on Raheja Corp’s expertise in Indian real estate market. But the investment operations will be independent of Raheja’s own real estate developments.
For instance, the JV will invest into hotels and strike management contract deals with hospitality brands independent of Chalet Hotels, an arm of Raheja Corp operating with mid-market to luxury brands such as Westin to Renaissance to JW Marriot to The Sheraton.
K Raheja Corp has been developing several real estate projects across commercial, residential and even special economic zone segment. Its retail formats include Shoppers’ Stop, Crossword, Inorbit Mall and Hypercity.
The JV, which operates akin to private equity, may not have many similar precedents in India. There have been couple of instances where overseas investors have tied up with local Indian players for private equity real estate investments in the country. This includes SUN Apollo, a joint venture between US-based AREA Property Partners and Delhi-based Khemka family’s SUN group. Another similar venture was between ICICI Venture and international developer Tishman Speyer, which ended in 2008 after both players decided to go their own way in the Indian market for their new funds.