Real estate firm Prestige Group is in talks with 2-3 large investors to raise $300-400 million, by monetising some of its retail mall and office assets, before it goes a real estate investment trust (REIT) listing in a year or so.
The fund-raising will help the Bengaluru-based developer in not only reducing its debt levels but the investor partner may acquire a stake in the rental portfolio and then become an anchor investor, when Prestige eventually goes for a REIT, the company's management told analysts in a post-earnings call.
Prestige’s current net debt stands at around ₹8,674 crore.
Prestige chief executive Venkat K. Narayana confirmed the fund-raising plan and said around 6 million sq ft of retail and commercial office space will be ready in the next ten months. The firm already has a rent-yielding portfolio of 15 million sq ft.
For a REIT listing, a sizeable, income-generating portfolio is an advantage. For Prestige, the fund-raising will not only give it time to build the portfolio, but also partially take care of its debt and allow it to construct without borrowing additional money.
“...We need to look at unlocking value from the yielding projects, so that can be redeployed into under-construction and upcoming projects. Both in retail and office yielding properties, the strategy would be unlocking and churning the capital becomes key," Narayana told analysts on the call.
The REIT has become a favourable option for India’s leading commercial office developers, after Embassy Office Parks successfully listed the first one in the country, in March, 2019. Narayana told Mint in an interview last August that the investor response to the Embassy REIT is encouraging.
In December, Mindspace REIT filed its draft IPO prospectus which will see the listing raise ₹1,000 crore through a fresh issue of shares, while existing shareholders, K. Raheja Corp. and Blackstone Group Lp, will offload a part of their shareholding through an offer for sale.
Over the last couple of years, Prestige has been steadily expanding into the Mumbai market, through joint development agreements with developers like DB Realty Ltd and landowners for both commercial office and residential projects. Mint reported on 23 December that Prestige has emerged as the top contender to take over debt-ridden Ariisto Developers, which is currently under insolvency proceedings, with both lenders and homebuyers approving the resolution plan submitted by the Bengaluru-based firm.
Separately, on Friday, Prestige said it has raised around ₹437 crore through a preferential issue of equity shares to Singapore-based GIC managed investment firm Gamnat Pte Ltd. With this, GIC has bought an additional 3.4% stake and increased its stake in Prestige from 5.7% to 8.9%.