Mumbai: Canada’s Brookfield Asset Management is close to buying at least four of five luxury hotels and a large land parcel owned by debt-ridden Hotel Leelaventure Ltd for about ₹ 4,500 crore, said three people familiar with the development. The deal, which is expected to close early next year, will mark Brookfield’s entry into India’s hospitality sector. It will also give a major boost to Hotel Leelaventure, which had a debt of ₹ 3,799 crore as of March 2018.
“The deal is at an advanced stage and is likely to be announced within a month. Brookfield will also buy out the brand ‘Leela’," said the first person cited earlier, requesting anonymity.
Hotel Leelaventure owns five luxury hotels comprising more than 1,400 rooms in New Delhi, Bengaluru, Chennai, Mumbai and Udaipur. Brookfield is likely to buy at least four of these properties and a large land parcel in Agra, the person said.
Brookfield didn’t respond to emailed queries for comment. A spokesperson for JM Financial ARC declined comment.
Hotel Leelaventure has been looking to sell some of its hotels and assets such as land for the last four-five years to pare debt. “The company and the lenders are evaluating various offers, so as to achieve maximization of value for all the stakeholders and there is no binding contract with any investor as on date either for investment in the company or for purchase of company’s assets," said a spokesperson for Hotel Leelaventure.
The potential deal with Brookfield comes when most of the big hotel chains are increasingly adopting an asset-light model and selling their assets to either fund growth plans or trim debt.
After the failure of its corporate debt restructuring plan in 2014, the Mumbai-based hospitality company transferred loans from 14 creditors to asset restructuring firm JM Financial ARC (JMARC). In September 2017, it allotted over 160 million shares worth about ₹ 275 crore to JMARC on conversion of debt to equity. JMARC owns 26% in Hotel Leela Venture.
The bulk of the proceeds from the transaction would be used to repay the 14 lenders, the first person said. “To be able to find a big investor would be a big news for the Indian hospitality industry, which has been starving for a good transaction for a long time," said Gulam Zia, national director, Knight Frank India, a property consultancy firm. “Leela has been a great brand and what has been troubling them is lack of capital. If capital infusion happens, then it (Leela hotels) can be a turnaround."
Hotel Leelaventure also manages four other luxury properties in India under its Leela brand. “There have been serious discussions with Brookfield and various stakeholders for a long time now. All stakeholders are keen that the brand and assets remain intact and the portfolio and brand emerges stronger than ever before," said the second person, also requesting anonymity.
Set up in 1986 by C.P. Krishnan Nair, Hotel Leelaventure at one time competed with the likes of Indian Hotel Co. Ltd’s Taj Hotels and EIH Ltd’s Oberoi hotels.
For Brookfield, the hospitality deal will follow its investments in commercial office, residential assets and infrastructure projects. “Brookfield is likely to put up a fresh team to run Leela, but they will not extinguish the brand Leela," the third person said on condition of anonymity.
Since its first buyout of Unitech Corporate Parks in 2013, Brookfield has grown aggressively, building and managing nearly 25 million sq. ft of commercial real estate space.
It has signed some of the biggest real estate deals in India, including acquiring Hiranandani group’s commercial offices for ₹ 6,700 crore and Essar group’s Equinox commercial complex for ₹ 2,400 crore.