PEs put pressure on realtors for exit route
The Economic Times, June 23, 2009, Page 7
Sachin Dave & Ravi Teja Sharma MUMBAI NEW DELHI
SEVERAL private equity (PE) players, global as well as domestic, whose lock-in period in real estate investments will end soon, are pressurising developers for an exit route. While some PE players are asking the developers to go for an IPO at an SPV or a portfolio level, developers who are wary about going public are approaching other investors or even buying back the stake themselves.
Said Biren Parekh, Partner, (Real Estate), Ernst & Young, “To get higher valuations in the booming market some developers delayed projects. Now many PE players especially at an SPV level want to exit and are asking the developers for an exit route.” A fund manager with a USbased PE fund agreed, “While some developers sat on the projects, time has been running out for us. Some clauses that formed the agreement which allows us to persuade developers and ask them to give the returns agreed upon.”
India’s real estate sector witnessed a fund inflow of over $16.5 billion since 2007 from PE players. While 2007 witnessed 86 deals in the real estate sector, the number was at 78 in 2008 and just six this year. Said Kaustuv Roy, Executive Director, Cushman & Wakefield, “Some developers are negotiating with the PE players as with the former wary of going public now. The IPO would be a big risk but PE players have their limitations and thus one may see some activity in the sector soon.”
There has been talk of a Mumbai-based real estate player looking to go public on account of a serious fund crunch. Likewise, another New Delhi-based budget hotel chain which invested heavily in building its property and had sold stakes to a few leading private equity players is also under pressure to go public.
“A number of private equity players today are driving a lot of strategic as well as operational initiatives within their investee companies. They are reworking debt, relooking at marketing strategy as well as day-to-day management,” says industry tracker Anckur Srivasttava. In another recent development, a large unlisted real estate firm, which is present in south and central Mumbai, has decided to return the funds raised to a PE player who had invested in its portfolio.
The Economic Times, June 23, 2009, Page 7
Sachin Dave & Ravi Teja Sharma MUMBAI NEW DELHI
SEVERAL private equity (PE) players, global as well as domestic, whose lock-in period in real estate investments will end soon, are pressurising developers for an exit route. While some PE players are asking the developers to go for an IPO at an SPV or a portfolio level, developers who are wary about going public are approaching other investors or even buying back the stake themselves.
Said Biren Parekh, Partner, (Real Estate), Ernst & Young, “To get higher valuations in the booming market some developers delayed projects. Now many PE players especially at an SPV level want to exit and are asking the developers for an exit route.” A fund manager with a USbased PE fund agreed, “While some developers sat on the projects, time has been running out for us. Some clauses that formed the agreement which allows us to persuade developers and ask them to give the returns agreed upon.”
India’s real estate sector witnessed a fund inflow of over $16.5 billion since 2007 from PE players. While 2007 witnessed 86 deals in the real estate sector, the number was at 78 in 2008 and just six this year. Said Kaustuv Roy, Executive Director, Cushman & Wakefield, “Some developers are negotiating with the PE players as with the former wary of going public now. The IPO would be a big risk but PE players have their limitations and thus one may see some activity in the sector soon.”
There has been talk of a Mumbai-based real estate player looking to go public on account of a serious fund crunch. Likewise, another New Delhi-based budget hotel chain which invested heavily in building its property and had sold stakes to a few leading private equity players is also under pressure to go public.
“A number of private equity players today are driving a lot of strategic as well as operational initiatives within their investee companies. They are reworking debt, relooking at marketing strategy as well as day-to-day management,” says industry tracker Anckur Srivasttava. In another recent development, a large unlisted real estate firm, which is present in south and central Mumbai, has decided to return the funds raised to a PE player who had invested in its portfolio.
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