Kotak Fund Sells City Building to Tata Realty for 525 Crore

Transaction is the first commercial property divestment in India by a fund

Marking one of the largest realty exits in India by any fund, Kotak Realty Funds Group, the private equity arm of Kotak Bank, has sold its 7,20,000-sq-ft commercial building in Goregaon, Mumbai, to Tata Realty for . 525 crore.
In August 2006, Kotak Realty, through its Kotak India Real Estate Fund I, had bought the property, which was then under construction, from K Raheja Constructions for . 230 crore. The property was controlled through the fund's special purpose vehicle (SPV) Peepul Tree Properties. Around 96% of commercial space here has already been leased to key tenants such as Accenture, HP, Tata AIG, BoB Legal and General and Integron at an average rental of . 70 per sq ft a month. These rent agreements at the 11-storey building will be due for a revision in April 2012.
The fund had purchased this property with equity of . 95 crore and the rest through debt from Axis Bank and Corporation Bank. "From our initial equity investment of . 95 crore, we have received over . 400 crore from the exit including internal accruals," said S Sriniwasan, CEO, Kotak Realty Fund to ET while confirming that the transaction was concluded last week. Realty consultancy firm, Jones Lang LaSalle India acted as the adviser for the transaction. According to industry officials, apart from being counted among the largest realty exits, the transaction is the first commercial property divestment in the Indian market by a fund.
Kotak India Real Estate Fund I with its total corpus of . 457 crore is completely deployed with other notable investments such as Lemon Tree Hotels, Pride Hotels, 3C Green Boulevard and Clover Golf community.
The fund has already exited three of its earlier investments including Sobha Developers and Mayfair Housing. Kotak Realty has also exited its investments in Phoenix Mills and NDR Warehousing in Mumbai. It is also believed that the fund is in talks to exit 3C Green Boulevard and a 20-acre land parcel at Old Mahabalipuram Road in Chennai.
"We are actively pursuing exit opportunities in our first fund, even while we continue to deploy capital from our subsequent funds. With this fourth exit, we will have the entire principle of the fund returned back to investors. The fund will now be able to provide returns in excess of 20%," said Mr Sriniwasan.
Kotak Realty has total $700 million worth of assets under advisory through two more funds including $331 million Kotak Alternate Opportunities India Fund and an offshore fund of $265 million.
Deal Talk

• THE 7,20,000-SQ-FT, 11
storey commercial building in Goregaon was purchased in 2006 from K Raheja Constructions for . 230 crore

• AROUND 96% OF THE SPACE
has already been leased to key tenants such as Accenture, HP, Tata AIG and BoB Legal & General for . 70 per sq ft a month. The rent agreement will be due for revision in April 2012

• CONSULTANCY FIRM JONES
Lang LaSalle India acted as the adviser for the transaction