Embassy buys out Goldman Sachs, Century in Bangalore realty project2 min read . Updated: 29 Sep 2014, 11:49 PM IST
To help finance the deal, Blackstone Group will invest Rs200 crore to acquire a 50% stake in the project
Bangalore: Embassy Property Developments Pvt. Ltd has bought out from its partners Goldman Sachs Group Inc. and real estate firm Century Real Estate Holdings Pvt. Ltd, a 6.5-acre project in Bangalore that will have a Four Seasons hotel and luxury homes.
The deal value is ₹ 630 crore.
To help finance the deal, global private equity firm Blackstone Group LP will invest ₹ 200 crore to acquire a 50% stake in the project. The remaining 50% will be with Embassy Property, which will develop it.
The transaction has been far from smooth and discussions on the deal have been on since early 2014 as Goldman Sachs and Embassy Property tried to iron out differences.
“It’s a good property and we intend to complete the project in two-and-a-half years’ time," said Jitendra Virwani, chairman, Embassy Property.
Goldman Sachs invested around ₹ 450 crore in the project at the beginning, according to two people who didn’t want to be named. It may now be exiting with a potential loss, they said.
Blackstone and Goldman Sachs declined to comment.
Embassy Property will take on ₹ 300 crore of bank debt that was given by a consortium of four banks led by State Bank of India. Another ₹ 330 crore of equity will be paid to Goldman Sachs and Century Real Estate. Out of this ₹ 330 crore, around ₹ 80 crore needs to be paid to the project contractors.
The project in Bangalore’s Yeshwanthpur area had attracted a lot of attention when Goldman Sachs announced it a few years ago. The joint venture involving Goldman Sachs and land owner Century Real Estate in a 75:25 partnership kicked off construction in 2010.
In 2013, Goldman Sachs said it plans to exit the project and initiated a bidding process. It even accepted a bid by real estate firm RMZ Corp. towards the end of 2013, but the deal didn’t go through when partner Century Real Estate brought in Embassy Property as another potential bidder.
Embassy Property and Blackstone have signed several deals together in the past. Blackstone and Embassy Services Pvt. Ltd, the property management arm of Embassy Property, are negotiating a ₹ 400 crore deal where the fund will pick up 50% in the company as both prepare to take forward plans to list a real estate investment trust. Blackstone and Embassy Property have lined up several commercial office assets in Bangalore, Chennai and Pune for this purpose.
The proposed Four Seasons property, designed in a mixed-use format, will also have 150,000 sq. ft of office space and high-end residences.
The mixed-development format in projects has usually worked well with rare instances of failure, said Ashutosh Limaye, head of research and real estate intelligence services at consultancy Jones Lang LaSalle India.
“Such integrated developments are self-sufficient, where the different components complement each other and benefit from each other, if developed well," said Limaye.