Realty back in vogue for PE funds
Business Standard, May 28, 2009, Section II, Page 13
2008 saw deals worth $8.4 billion in the real estate sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far
VANDANA, Mumbai
After being at the receiving end of investors' wrath, the real estate sector is back on the radar of private equity (PE) investors. Real estate consultants say PE funds are now finding good investment opportunities in the sector.
The high level of interest is quite clear in the recent wave of qualified institutional placements from real estate companies.
According to Grant Thornton's deal tracker, Orient Global. Sandstone Capital, HSBC and Och-Ziff Capital recently invested $325 million in Unitech. Standard Chartered Private Equity has pumped in an undisclosed sum in Man Infraconstruction. And TPG Capital and Fidelity have invested in the qualified institutional placement by Indiabulls.
While most action has been in listed companies, project level investments, too, are picking up. "Private equity funding in real estate has certainly revived. The difference being that funds are now looking at smaller projects that can ensure cash flows, rather than big projects. The deal size has also become smaller and is in the range of $20-50 million," said Amit Goenka, national director (capital transactions), Knight Frank.
Experts say valuations have become more reasonable in the sector, post the downturn. A part of the revival is driven by easing liquidity in the system and new sales.
"There's a lot of action in the Mumbai real estate market. Price discovery has happened and volumes seem to be coming back. There is an expectation that not much downside is left now. From investors' point of view, there is ample liquidity. Election results have given another hope to the sector. We are looking at several projects," said Shahzaad Dalal, VC & MD at IL&FS Investment managers.
Jai Mavani, executive di¬ector, KPMG, said, "The wait and-watch period is certainly 'over. PEs have become more :cautious and are not looking at risky projects. They are looking at structured equity deals, rather than plain vanilla structures."
According to Venture Intelligence, 2008 saw deals worth $8.4 billion in the sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far. In one of the largest deals so far this year, Sun Apollo Ventures acquired 15 per cent in Keystone Realtors for Rs 200 crore. IL&FS Realty Fund has picked up 15 per cent stake in Infrastructure Ventures India, a special purpose vehicle floated by Mumbai-based Akruti City, for Rs 200 crore.
Business Standard, May 28, 2009, Section II, Page 13
2008 saw deals worth $8.4 billion in the real estate sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far
VANDANA, Mumbai
After being at the receiving end of investors' wrath, the real estate sector is back on the radar of private equity (PE) investors. Real estate consultants say PE funds are now finding good investment opportunities in the sector.
The high level of interest is quite clear in the recent wave of qualified institutional placements from real estate companies.
According to Grant Thornton's deal tracker, Orient Global. Sandstone Capital, HSBC and Och-Ziff Capital recently invested $325 million in Unitech. Standard Chartered Private Equity has pumped in an undisclosed sum in Man Infraconstruction. And TPG Capital and Fidelity have invested in the qualified institutional placement by Indiabulls.
While most action has been in listed companies, project level investments, too, are picking up. "Private equity funding in real estate has certainly revived. The difference being that funds are now looking at smaller projects that can ensure cash flows, rather than big projects. The deal size has also become smaller and is in the range of $20-50 million," said Amit Goenka, national director (capital transactions), Knight Frank.
Experts say valuations have become more reasonable in the sector, post the downturn. A part of the revival is driven by easing liquidity in the system and new sales.
"There's a lot of action in the Mumbai real estate market. Price discovery has happened and volumes seem to be coming back. There is an expectation that not much downside is left now. From investors' point of view, there is ample liquidity. Election results have given another hope to the sector. We are looking at several projects," said Shahzaad Dalal, VC & MD at IL&FS Investment managers.
Jai Mavani, executive di¬ector, KPMG, said, "The wait and-watch period is certainly 'over. PEs have become more :cautious and are not looking at risky projects. They are looking at structured equity deals, rather than plain vanilla structures."
According to Venture Intelligence, 2008 saw deals worth $8.4 billion in the sector. This year, the number is comparatively lower, as the deals have just started to pick up. Only three deals worth $80 million have been closed so far. In one of the largest deals so far this year, Sun Apollo Ventures acquired 15 per cent in Keystone Realtors for Rs 200 crore. IL&FS Realty Fund has picked up 15 per cent stake in Infrastructure Ventures India, a special purpose vehicle floated by Mumbai-based Akruti City, for Rs 200 crore.
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