Bangalore: India’s largest developer by market value, DLF Ltd, plans to create one or more real estate investment trust (REIT) platforms either independently or in partnership with financial partners, to harness the growth in the market and to unlock and partly monetize its investment in rental yielding assets, the company said in an analyst presentation late on Thursday night.
DLF’s plan for REITs comes at a time when the Securities and Exchange Board of India (Sebi) has banned the property developer, its chairman K.P. Singh and some other executives from accessing Indian capital markets for three years, finding them guilty of engaging in fraud and unfair trade practice.
“REIT platforms are expected to be a potential game changer as it unlocks value, aids spin-off of debt, and creates long-term free cash flows in the form of dividends,” the company said.
DLF has a large rental yielding asset base of 27 million sq. ft and an estimated annuity income of Rs.2,100 crore in 2014-15.
The company said that as its retail and office business segments grow, the company is reviewing multiple options to harness the growth that the market offers.
First, it may create one or two separate REIT platforms for its retail and office businesses to recycle growth capital.
Second, it is looking at creating long-term free cashflows for the company in the form of dividend flows as holders of REIT units and fees from the management of the same.
To achieve these, DLF is looking at partnering global financial or strategic partners, who may be interested in participating in the developer’s REIT plans. This would include partly encashing its investment in the rental business, called RentCo.
An HDFC Securities Ltd report on Friday morning said it maintains its ‘sell’ rating until clarity emerges on the Sebi ruling.
DLF posted an 8.9% increase in net profit to Rs.109 crore in the fiscal second quarter from a year ago. The company’s revenue increased 2.9% to Rs.2,013.15 crore in the three months ended 30 September.