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Godrej Properties, global investors’ group set up investment platform

Godrej Properties, global investors’ group set up investment platform

Bangalore: Godrej Properties Ltd (GPL) and a consortium of global investors led by Dutch pension services provider APG have set up an investment and development platform that will pump in about 770 crore in residential projects over the next two years.

Together, they will buy land in Mumbai, the Delhi-National Capital Region (NCR), Bangalore, Pune and Chennai and develop four-five mid-income residential projects over the next seven years, Godrej Properties announced on Monday.

Pirojsha Godrej, managing director and chief executive of Godrej Properties, said the platform has been created on the basis of a partnership between the firm and the investors’ consortium, through which multiple projects will be executed. A joint venture firm has not been formed separately, he said. Godrej will contribute to 29% of the proposed investments, while the remaining will come from the investors.

Godrej, unlike many other developers who buy expensive land to build projects, typically sources land rather than buy it outright through the less capital intensive, joint development model. The new structure will enable Godrej to buy land together with the investors, thus keeping its exposure low, while also earning a development manager fee and a share of the profit.

The investor group includes Sparinvest Property Fund II, a real estate fund-of-funds managed by Sparinvest Property Investors. Macquarie Capital (India) Pvt. Ltd was the sole financial adviser in the transaction.

Mumbai-based Godrej Properties raised 470 crore in March by selling shares via institutional placement, similar to a qualified institutional placement, at a time when other firms have received lukewarm response to similar exercises. It also ventured into the rather niche and specialized area of redevelopment projects in Mumbai this year.

Priojsha Godrej said the association with the global investor group will enable the firm to source deals with large capital requirements in its core markets Mumbai, NCR and Bangalore. “This is an important growth opportunity for GPL which will allow us to extend the number of projects in our portfolio while maintaining our capital efficient land sourcing strategy," he said.

Akshit Shah, a research analyst with SBICAP Securities Ltd, said the firm will have to pay up to 29% of the cost of acquiring land. In regular joint development deals, it pays 20-25% of the land value upfront to land owners in the Mumbai market, and 12-18% in NCR and Bangalore.

“We are looking forward to this relationship with Godrej Properties to invest in the mid-income residential segment in India’s tier-1 cities," Sachin Doshi, a senior portfolio manager for APG in Hong Kong, said in a note. “We particularly like Godrej Properties’ capital efficient strategy and the strong brand affinity it enjoys with its customers and stakeholders."

This year, APG has invested about 650 crore for a stake in Lemon Tree Hotel Co. and formed a joint venture to build 35 hotels over four years.

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