"The fund will have a green-shoe option of $200-250 million," said Ramesh Jogani, MD & CEO, Indiareit Fund Advisors.
Indiareit expects both individual and financial institutions, including insurance and private equity players from the US, Europe, the Middle East, Japan and South-East Asian countries, to investments in the fund.
The minimum investment size for individuals in the fund would be as low as $0.5 million, while institutions would have to shell out $5 million to get a pie of the fund, to be raised through distributors.
"There is a lot of euphoria for Indian real estate sector among the big PE players overseas and the company intends to partner them to become a major player in the country's real estate sector. Indiareit will invest the fund over a period of four years... All leading distributors would be engaged to market the fund," Jogani said. This is Indiareit's second offshore fund, expected to come out by the end of the current year.
Earlier Offshore Fund: Set up in March 2006, Indiareit Fund advisors had earlier came out with an $200 million offshore fund in which major private equity player 3i had invested $40 million.
Indiareit source said bulk of the investment in the fund had came from the Middle East while there were private equity investments from Singapore and the UK.
Domestic Fund: Recently, Indiareit had launched a Rs 350 crore domestic fund with a green-shoe option of another Rs 350 crore. So far, it has raised Rs 500 crore out of the fund and expects to close the fund in the next two to three weeks.
The company has already raised 100 million dollars (Rs. 410 crore) from IL&FS Realty, the real estate fund of private equity firm IL&FS Investment Managers Ltd. Interestingly, IL&FS Realty will own 100% stake in the company initially, and the management will get a stake on delivery.
A part of this, 100 million dollars, has been utilised for buying the land. QVC would meet the development and construction cost from debt, internal accruals and equity at project level.
"We have acquired 200 acre land in Gurgaon for developing two townships of 100 acre each. The estimated investment in these two projects would be about Rs 2,500 crore,"company's founder and CEO Prakash Gurbaxani said, as per today's zeenews.
However as per DNA Money: “In four years, the combined capital value of the two projects (Gurgaon and Bangalore, at that point of time this was the plan) is expected to touch Rs 3,000 crore,” said Mr. Gurbaxani in April.
The two partners have not yet decided on a fixed profit sharing ratio. (!) “However, the management (QVC and IILM) may take their respective stake on delivery of projects,” said Shahzaad Dalal, managing director, ILFS Investment Managers. IIML has also committed to partner QVC in all its future real estate projects, according to Dalal.
The IL&FS Realty Fund is a private equity fund, mandated to invest in equity/ equity related instruments of Indian Companies operating in the Real Estate sector and related areas. The Fund will seek to achieve a gross investment-level leveraged annual internal rate of return in excess of 25%. In addition, the Fund will target a cash-on-cash stabilised yield on equity exceeding 8% per annum for income-generating projects
IL&FS Investment Managers Limited (IIML) is one of India’s largest domestic private equity fund management companies, managing over US$ 1 bn on behalf of leading Indian and international institutions. IIML presently manages an array of funds focused on investments across infrastructure, real estate, life sciences, manufacturing, information technology, and consumer services. IIML is a publicly traded investment management company with Infrastructure Leasing & Financial Services Limited (IL&FS) being the principal shareholder
Prakash Gurbaxani, well known serial entrepreneur and one of the pioneers of ITeS industry in India, founded QVC Realty Ltd. in March 2007. QVC stands for Quality and Value for the Customer. He has over 20 years of experience in a wide variety of industries including real estate, construction, BPO and technology.
From June 2005 to Jan 2007, Prakash Gurbaxani was the CEO of TSI Ventures, a joint venture between Tishman Speyer, USA and India's ICICI Venture. TSI Ventures is a fully integrated real estate investment management and operating company with a mandate to identify, invest in and develop properties with a cumulative asset value in excess of USD 2 billion over the next 5 years.
As CEO, Gurbaxani’s responsibilities included directing all aspects of the business such as strategy, business development, design and construction, acquisition, sales and marketing, investor relations, fundraising, finance and property management.
Prakash Gurbaxani holds a Master's Degree in Construction Management from New Jersey Institute of Technology (NJIT), Newark, NJ , and a B.S. (major in Civil Engineering) from Regional Engineering College (REC), Nagpur, India.
Besides Gurgaon, Gurbaxani said the company was close to acquiring a project in Bangalore and is scouting for land in Hyderabad, Chennai and Pune to undertake more realty projects.
Mr. V S Kumar as VP Finance & Company Secretary, Mr. C J Balasubramanya as VP Design & Construction, Mr. Ramesh Jagirdar as VP Legal and Mr. David Finehirsh as its Sr. Business Analyst for Strategy & Acquisition joined Mr. Gurbaxani's team in the month of June.
Yes, Mr. Gurbaxani there is a lot of "Quality, Value, Convenience" for you and your fund mangers. Wish you all the best.
If you've been following the daily headlines about the subprime crisis and the deflation of the housing bubble, you know that you would have to be completely out of your mind to invest in real estate.
The right pronunciation of 'REIT' in English rhymes with "sweet" says Mr.D. Murali in The Hindu. I pronounced 'REIT' several times but it never sound 'sweet'! "Every morning I am going to do loud reading of The Hindu to improve my diction" I announced. But, my wife found out the other article by the same author. There she found out, 'REIT' is pronounced as 'REET'! So sweet of her.
What is REIT?
In its simplest form, REIT is a way of securitising property; it breaks down the ownership of one or more buildings into units that are sold to investors and usually listed on the stock market, writes Mr.Murali.
B. Benefits for Developer:
B1. You can have the cake and eat it too:
For the developer REIT is more profitable than keeping the ownership of the property and earning lease. 1. Developer constructs a property and gives it on lease. 2. Developer sets up REIT. But retains 30% stake. 3. Developer gets funds -- 70% of the value from the retail investors. 4. Indirectly, property is still in the developer's control! 5. Developer sets up REIT management firm and earns additional income from fees for managing (his) REIT. 6. Of course, income from lease and rent continues.
B2. Recycle Your Capital: Your unlocked funds keep on multiplying:
Now you have got your 70 % funds back. Which you can use in a new project. As soon as this project is ready you can sell it to your REIT and thus go on and on. Obviously, with every project you are going to multiply your funds and earn lots more than the lease.
C.Benefits for retail investors:
C1.From an investor’s perspective, units in a REIT are instruments for investment in addition to shares, units of mutual funds and bonds (government or private).
C2.The Satisfaction of 'Ownership of Property'
Thanks to Late Shri Dhirubhai, because of him we have an investor culture in India. Over a period, Indian investors have learned to give more value to 'the satisfaction of ownership' than to the amount of money they receive as a dividend. Every time when i am in Navi Mumbai, because of my couple of shares, i feel so proud of my companies and i wonder how much more satisfied i would have been if Anil and Mukesh would have had a couple of more brothers! But remember, you are going to give me that kind of satisfaction which i yearned for ages. Now you and your REIT is going to give the satisfaction of ownership of property, say for example a software park. Security may not let me go in, so what? Honor of owning a piece of property is great. Ask any Indian!
C3.Investor can become a millionaire by retirement!
Or he can provide for the fees of his new born baby when it gets admission to the junior college. Because REIT generally pay good dividends. Unbelievable but true. According to Mr. Dominic Whiting, Author Of ‘PLAYING THE REITS GAME’ in US REITs have paid around 13% average returns for last two decades! You have to be invested in your REIT for next 25/30 years. I am sure, considering RBIs negative opinion about funding real estate, you can make up your mind to give that much returns to your REIT's investors.
C4.How much?
Why Singapore?:
1. Since you can not set REIT in India you have to go overseas. Yes, Middle east is an option, but they say Singapore is better. 2. Singapore allows you to package your properties in India into your Singapore listed REIT. 3. Singapore offers tax exemption for corporates as well as individuals. 4. Singapore has a limit of 60% on debt gearing so you can acquire more funds than you can in Hong Kong.
REITs increase the valuation of the property:
As per Mr.Whiting, because of the tax exemptions and less expectations of the investors, REITs pay more - you get better rate for your property; transact more - increase in the numbers of transactions; so market value of the properties increases. We always enjoy price rise, isn't it?
Investment Grade Buildings:
This is a serious issue. We have very less Investment Grade Buildings. Out of 300$ Billion worth of commercial buildings only $83 Billion can be considered as Investment Grade. It means we have a lot of scope to improve the quality.
Indian real estate bubble:
"A REIT market in India could take off if the current boom turns into some kind of bust." As per Mr. Whiting, in US as well as in Japan, growth of REIT has happened only when market was low. So he expects for the sake of the growth of the REIT something should happen in our market!? Do you think current boom is only a bubble?
Indian real estate news:
“The Indian real estate is hampered by poor foreclosure laws, tedious property registration processes, tax and transaction laws that vary by the state and frequent contests over property ownership.” says Mr. Whiting. This is not a news for us. Is it?
"It is felt by some people that REITs have a heating effect on a country’s property market. However, REITs have exactly the opposite effect. If a REIT market is underpinned by appropriate legislation, REITs will have a price stabilising effect on the market." says The Chief Executive Officer of the Singapore-based Asian Public Real Estate Association (APREA — an association of listed real estate companies in the Asia Pacific), Mr Peter Mitchell.
Let us see how DLF is playing REIT game:
1.Advertising is not the only place to push your product: We all know, we can do it on editorial pages by publishing articles promoting your cause. See for example these statements: 1. "The one financial product that Indian investors badly need and continue to be denied is a real-estate investment trust, or REIT." : shows your concern for Indian citizens. 2. "India must decide whether we want to keep the business at home, in Mumbai or loose it to Singapore?" : shows how patriotic an Indian you are. 3."Indian investors are kept out of the market on the pretext that the real-estate business in India is unsuitable for the small guy." According to Oxford English Mini-Dictionary, PRETEXT n. a false reason used to justify an action. PRETEXT: 1)Title rights aren’t clear 2)Transactions are often funded with black money 3)Valuations are suspect. :Convince your fellow citizens to ignore these things. This shows how much you want them to prosper. 4. "If investors in Singapore can live with the market imperfections, there’s no reason why Indian investors, who are much more aware of the risks, can’t be trusted to make intelligent decisions." : shows you value intelligence and since people working in IT are called 'knowledge workers' they like to be called 'intelligent'. 5. To put all these arguments powerfully read this article more than once.
Indian real-estate billionaire Kushal Pal Singh's DLF group is raising $1 billion from investors, including Lehman Brothers Holdings Inc., and may sell shares in property trusts in the South Asian nation or overseas
In a tete-a-tete with Niren Shah, the chairman of Parsvnath Developers, Pradeep Jain, lashes out at competitors including the largest real estate player DLF for showing sudden jump in revenues and profits and claims that his company has maintained consistent growth over the past many years. But we are neither in the business of trading land, nor are we selling a finished structure leased out to somebody, to our associate company to book profits only in the books (referring to DLF). That is not operating profit or operating revenue.
So, if we say we have certain number of acres of land, we have acquired that land only after making sure that it is usable, under approved zones. We get the sale deed made, enter into an agreement and ensure an uninterrupted possession of that land with the company for urban development. We do not just draft memorandums of understanding (MOUs) without keeping ground reality in mind.
DLF promoter K P Singh has emerged as the richest real estate baron after his company's initial public offering closed on June 14.
Promoters of the dozen top listed real estate developers in the country, including DLF Ltd, which will be listed next month, are worth a massive Rs 125,845 crore (or over $30 billion).
India will need to change parts of its legal and taxation framework for real estate investment trusts (REITs) to find a foothold in the country’s booming real estate market, according to a joint research paper by credit rating agencies, Moody’s Investors Service, and Icra Ltd.
Another DLF company may hit the capital market over the next one year. DLF Group subsidiary, DLF Assets, may go public next year or get converted into Real Estate Investment Trust (REIT). It is at present awaiting SEBI`s guidelines on REITs. DE Shaw, the leading US hedge fund with over USD 30 billion in assets, has recently invested USD 400 million in DLF Assets. This could mean that the management could be seen as more investor friendly than in the past and those chances of negative surprises could be few and far between.
Indian real-estate billionaire Kushal Pal Singh's DLF group is raising $1 billion from investors, including Lehman Brothers Holdings Inc., and may sell shares in property trusts in the South Asian nation or overseas.Bloomberg.com: India
As REITs (real estate investment trusts) are yet to take shape in India, about a half a dozen realty firms have started the spadework for listing REIT-like vehicles on the Singapore Stock Exchange (SGX).
Banking on the easing of listing norms by the SGX two months ago, the Bangalore-based developer Embassy group, Ascendas, provider of business space solutions in Asia, and the Delhi-based DLF and Unitech are planning to list their fund structures, which mainly include REITs, on the SGX....Realty firms plan trusts to list in Singapore
With realty booming in India, it is just a matter of time before the concept of real-estate investment trust (REIT) gains ground among investors and policymakers. REITs, as investment vehicles that reduce the tax liability of corporates, are well established in Japan, Singapore and some western economies, and are bound to make an appearance in India in the next few years, according to Mr Dominic Whiting, author of Playing the REITs Game ( www.wiley .com), which focuses on the Asian opportunity in this sector.
In an e-mailed interview to Business Line on the concept and its relevance to India, he said that because of the rapid pace of construction, India will soon have a critical mass of assets that would allow a REIT market to form.......The Hindu Business Line : REITs — poised to gain ground
SINGAPORE, June 25 (Reuters) - CapitaLand (CATL.SI: Quote, Profile , Research), Southeast Asia's most valuable developer, is set to launch two more property funds this year that will invest in India and China with initial funds of S$500 million (US$325 million) each, its Chief Executive Liew Mun Leong said on Monday.
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