Bangalore: Indiareit Fund Advisors Pvt. Ltd has sold about Rs.440 crore worth of investments this year and is preparing to raise up to another $350 million (around Rs.1,921 crore today) for an overseas fund, a top executive said.
The exits add to the Rs.905 crore the real estate-focused private equity firm has returned to investors in previous years.
Indiareit’s latest stake sales are part of an emerging trend by funds that invested in India’s real estate sector during its best years in 2006 and 2007. With typical investment horizons at about five years, these funds are now looking to exit and return money to investors.
Most of Indiareit’s recent exits were from investments made in real estate projects in Mumbai, Pune and Coimbatore from its first three funds, said Khushru Jijina, who’s overseeing operations at Indiareit after Ramesh Jogani resigned as chief executive earlier this year. In Pune, Indiareit sold a part of its 30% stake in a township project being developed by Paranjape Schemes (Construction) Ltd to IDFC Private Equity Co. Ltd for an undisclosed sum. It had invested Rs.242 crore in 2007 for the stake.
Indiareit also sold its holdings in two Ariisto Group projects in Mumbai—a residential development at Santacruz and a mixed-use project at Goregaon—back to the promoters.
The firm had invested a total of Rs.150 crore in these projects in 2008 and has so far realized Rs.117 crore from project sales. It expects to receive about Rs.190 crore more in the next quarter, Indiareit said in a statement on Tuesday. The overall internal rate of return (IRR) from the Ariisto projects is about 21%, said Jijina, who is also the managing director of Piramal Realty Ltd.
Jijina, who took over as Indiareit’s managing partner in September, said the Piramal Group thought it appropriate to return money to its investors from money deployed in 2006-07.
“We have initiated discussions with our development counterparts in order to prioritize such exits with a view towards final realizations keeping in mind the various fund tenures,” Jijina said over the phone on Tuesday.
Indiareit also counts among its recent exits its advice to F&C Reit Property Management India Pvt. Ltd, a family office trust, to sell its investment in a Coimbatore plotted residential development for an undisclosed amount. Indiareit is an adviser to third-party funds of F&C Reit.
The Piramal group firm, meanwhile, continues to deploy capital from its fourth and fifth funds; about Rs.230 crore from the fourth fund and Rs.750 crore from the fifth. “We are also looking to raise an offshore fund, of around $300-350 million, from investors in Europe, the US, Middle East and South-East Asia,” Jijina said. “We had taken a small pause in raising this fund and focusing on exits. Now that exits are happening, we are working on the new fund.”
The structure of the fund is still being worked on. “We are looking at a small fund size and don’t want to invest for the sake of investing,” he said, adding that most of the investments from this fund are likely to be in the form of co-investments with developers. Fund managers have been finding it tough to raise capital from overseas investors because of the difficult economic circumstances both overseas and in India. But Gaurav Kumar, co-head, capital markets, at property advisory CBRE South Asia Pvt. Ltd, said while fund-raising is tough in the current economic scenario, it also depends on who the fund managers or general partners (GP) are.
“There are a few who are raising offshore funds with the help of good GPs. Also, since there aren’t too many raising offshore capital, it shouldn’t be an uphill task for Indiareit,” he said.