Alok sells office space in Mumbai for Rs425 cr2 min read . Updated: 21 May 2012, 10:29 PM IST
Alok sells office space in Mumbai for Rs425 cr
Bangalore: Alok Industries Ltd, one of India’s largest textile firms, has sold eight out of the 20 floors in an office building in Mumbai’s Lower Parel area to various firms, managing director Dilip Jiwarajka said in a call with analysts on Monday.
It sold around 252,000 sq. ft of prime office space in tower B of the Peninsula Business Park for about ₹ 425 crore, at an average of ₹ 17,000 a sq. ft, another company official said on condition of anonymity.
A subsidiary of Alok bought the Peninsula Business Park building, with a total of 641,000 sq. ft of saleable space, in 2007 from Peninsula Land Ltd for ₹ 1,054 crore, one of the most expensive deals of that time, when prices were surging.
Alok Industries has also leased or sold three out of the eight floors in Ashford Centre, Lower Parel, the company said in a statement without disclosing the sums involved.
“The transaction rate for the Peninsula Business Park deal is not bad, considering the challenges in the office space market and the huge amount of supply in the Lower Parel area," said Ambar Maheshwari, managing director (corporate finance), Jones Lang La Salle, a property advisory. “Investors or buyers would get about 10-11% of annual returns in such a deal, and lease rental rates would be around ₹ 170 a sq. ft."
Alok started divesting its real estate portfolio outside Mumbai in mid-2011 to ease debt, almost a year after it announced the plan. The company signed a deal to sell 73 acres in a 500-acre land parcel in Silvassa, the capital of Dadra and Nagar Haveli, to a group of manufacturers.
BNP Paribas Real Estate and Infrastructure Advisory Services Pvt. Ltd, in a report this month on the Mumbai office space market during January-March, said that unlike in the previous quarters when companies bought office spaces in small northern markets, many of the transactions in the latest quarter were concentrated in Lower Parel and off Bandra-Kurla Complex, a business hub in suburban Mumbai.
This included the long-term sub-lease of the Gulita Property at Worli by Hindustan Unilever Ltd to Piramal Realty for ₹ 452.5 crore.
Between April and June, consumer packaged goods and durables companies are expected to drive demand for office space and keep rental values stable, BNP Paribas said.
Ravi Ahuja, executive director, office transactions, Cushman and Wakefield Inc., a property advisory, said sales of floors in office buildings to investors is a common practice among developers looking to derisk their assets and get the cash flows coming before a building is actually leased out.
“It’s a good opportunity for investors because they enter at a time when there is a lot of potential for appreciation of the property values," he said.