BackJP Morgan’s property fund seeks to exit Trident, Oberoi hotels in Hyderabad
JPMorgan India Property Fund's investment in the said Oberoi and Trident hotels has been plagued by delays and high debt
Premium
Mumbai: JPMorgan’s India Property Fund is in talks to sell its investment in two five star hotels in Hyderabad, according to two people aware of the development.
The fund is seeking an enterprise valuation of Rs800-850 crore for the two properties, they said, requesting anonymity.
The two hotels are part of the Trident and Oberoi chains and are located in the Hitec city area of Hyderabad, one of the two people cited above said, requesting anonymity as the talks are private. “They have been speaking with various parties over the last few months."
The two hotels are operated by a special purpose vehicle Golden Jubilee Hotels Pvt. Ltd. EIH Ltd, the company that owns the Trident and Oberoi hotel brands, owns a 16% stake in Golden Jubilee with the rest being owned by Core Hotel Ventures Pvt. Ltd, the holding company.
JPMorgan had invested around Rs100 crore in Core Hotel Ventures and owns a 47% stake, according to documents filed by the company with the Registrar of Companies (RoC). The remaining stake is held by Maha Hotel Projects Pvt. Ltd, the lead developer of the project.
Golden Jubilee was set up to build two five star hotels (324 rooms Trident and 221 rooms Oberoi) on a 4.33 acre plot of land in Hyderabad. JPMorgan declined to comment on the development.
“Financial outlook of the company’s shareholders are their own private matters for which the company has no comments to offer," said a spokesperson for Golden Jubilee Hotels in an emailed response.
The JPMorgan fund’s investment in these properties has been plagued by delays and high debt. While the Trident has been functional since late 2013, the Oberoi property is yet to be completely developed. The initial plan entailed starting the Trident in 2012 and the Oberoi in the following year.
The overall development cost of these projects is estimated to be Rs1,087.81 crore, funded by debt of Rs650 crore and equity of Rs437.81 crore, according to data from the company’s filings with the RoC.
As of 30 June 2015, the latest available financial statements with the RoC, the hotel had a revenue of Rs71.7 crore and a loss of Rs15.6 crore.
“The incoming investor will have to put up some equity to make the Oberoi property operational. This could be in tune of Rs100-150 crore," said the second person cited above.
In August, Mint reported that EIH, in line with the company’s policy of taking “abundant caution" with accounting, has provided Rs41 crore in its books towards full erosion in the value of its investment in the Hyderabad property. The investment hasn’t yet been written off, the report added.
According to data from Venture Intelligence, PE/VC investments witnessed a year-on-year decline of more than 60% in the hospitality space. About $242 million PE/VC investments were recorded across 27 deals in 2016 as against $663 million across 47 deals in 2015.
Last week, Paris-based Louvre Hotels Group acquired a controlling stake in Indian hospitality chain Sarovar Hotels Pvt. Ltd, both firms said in a statement on Thursday, without disclosing financial terms of the deal.
As part of the transaction, Sarovar’s existing investors—US-based venture capital firm Bessemer Venture Partners and private equity firm New Vernon Private Equity—are exiting the firm. The firms had bought a 28% stake in Sarovar Hotels for about $8 million in December 2005.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
