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Private Equity Funds Betting Big On City Properties

By siddharth22, Section Real Estate
Posted on Thu Feb 28, 2008 at 11:19:57 PM EST

Foreign private equity funds are queuing up for biting into the city's burgeoning real estate pie. Over the past 18 months, several large PE transactions have been concluded, in addition to an enterprise level hospitality exposure by Credit Suisse in Park Hotels.

The inflow of organized private equity began with New Vernon taking exposure in an IT building project developed by Sureka Group in association with Bikram Dasgupta's Globsyn. UK REIT then invested a significant amount in residential projects being developed by the Eden group.

* Name Of Fund
U K Reit New Vernon Credit Suisse Eredene Capital Saffron Asset Advisors Starwood Capital Walton Street

* Name Of Project/Enterprise
Eden Projects Globsyn Crytal Park Hotels Apeejay Group Calcutta Riverside Sriram Housing Sriram Housing

* Nature Of Project
Residential IT Building Enterprise investment Logistics Park at Haldia IT Building Multi use township Multi use township

The largest private equity exposure in terms of project size came from Starwood Capital and Walton Street into a 150 acre mixed use project being developed by the Sriram group in Hindustan Motors near Uttarpara. Both have pumped $50 million each into the development. "The PE funds have been scouting the turf for the last three years. We are very happy to witness that they are now concluding transactions and deploying money into projects," said Abhijit Das, regional director, Jones Lang LaSalle Meghraj, the largest real estate consultancy firm in the country.

Explaining the decision to invest in the Kolkata market, Reit Properties India director Alex Hayim said several factors stood out in the city's favour educated population and qualified workforce, good infrastructure, worthy heritage and bright future.

"The large and diverse population is exciting in itself. Price of land is an added attraction as rates are more affordable than many other cities," Hayim said. A representative of PE investment firm Starwood Capital, too, felt the abundant talent pool and pent up demand were factors that attracted foreign investors to Kolkata. "The city's emergence as an IT hub and development of New Town as an integrated township have stimulated the market further," she said.

The other PE transactions which have been concluded recently include Eredene Capital's investment in an Apeejay Group logistics park project in Haldia, JM Financial's enterprise level investment in Shrachi and Saffron's investment in Calcutta Riverside project being developed by Calcutta Metropolitan Group in joint venture with Bata.

PE fund Walton Street vicepresident Navin Dhanuka, who happens to be from Kolkata, is convinced the future lies here. "The city's inherent strengths like sound education base, stable government and affinity to culture makes it more attractive, than say Ahmedabad which has a history of ethnic riots. Of course, there are concerns about what would happen beyond Buddhadeb Bhattacharjee, but there's a general feeling that the industrialisation and development process cannot be reversed," Dhanuka said.

Over the next couple of years, Das expects funds based in US, Europe and West Asia to invest millions of dollars in Kolkata. "We are currently engaged in six more private equity transactions in Kolkata, two of which are expected to be concluded by first quarter next year. There are at least half a dozen other opportunities in the market," Das added.

This year may witness the conclusion of 10 more private equity investments in Kolkata, taking the total investments from PE funds into projects in Kolkata to over Rs 1,000 crore.

Source:The Times Of India,28-02-08

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