JP Morgan’s real estate arm is in talks with Bangalore-based realty developer Prestige Group to infuse close to $100 million in the company, sources said. They said the infusion could be through equity placement or debt financing in the flagship company Prestige Estates & Projects.
Sources said the cash generated could be employed for developing projects across south India, as Prestige looks to expand its footprint outside Bangalore in a big way. Last year, Prestige had reportedly raised $100 million through debt financing for specific projects.
As of today, the Rs 300-crore Prestige Group has to its credit over 120 completed developments, encompassing over 10 million sq ft of commercial and residential area. Some of the group’s noted developments include the UB City, Prestige Shantiniketan as well as the Prestige Technology Park, all in Bangalore.
In the pipeline are the company’s plans to develop a mall in Hyderabad, a residential development in Kochi, a technology park in Chennai and villas in Goa. The Group’s existing land bank in south India is reportedly over 500 acres.
Meanwhile, JP Morgan has been bullish on the realty sector in India, as it continues to pump massive investments into the real estate sector in the Asia Pacific where it showed up with a portfolio of nearly $22 billion in FY07. The proposed funding into Prestige could be sourced from JP Morgan Asset Management’s $360-million India Property Fund.
In context, it may be noted that debt financing route continues to be the preferred route for realty companies. A study of the country’s leading developers would reveal that most of these firms are debt heavy.
“The cost of debt, which is not more than 15% in today’s rates, is much lower than the cost of equity, which is usually about 25%. Debt financing is still very popular with real estate majors for it is the easiest and fastest way to raise funds — all a firm needs to do is mortgage its assets to raise money,” says, DTZ India director (investment advisory) Ambar Maheshwari.
Meanwhile, Prestige has joined hands with Chennai-based Vijaya Productions to jointly develop a nearly 1.5 million sq ft mega mall cum multiplex at Vadapalani in Chennai, reports D Govardan from Chennai. The mall and the multiplex would be developed at a cost of Rs 380 crore, including land cost. The project is expected to be completed by March, 2009.
According to sources in Prestige, the 1.48 million sq ft development will include a large retail area, a nine-screen multiplex and a 0.3 million sq ft commercial office space. Besides, it will also have a 23-level multi-level car parking to accommodate about 2,000 cars. “It will be a single block 12 tower structure, with a floor plate size of 1.2 lakh sq ft each. While the retail and the multiplex space will face the Arcot Road, the rear space will be a mix of retail, commercial and parking levels,” Stephen Daniel, general manager for Prestige projects in Chennai told ET.
He said, the project has already received the clearance from the Union ministry of environment and forests and the pile foundation work is almost complete. “We are in the process of finalising other contracts, including our construction partner, where we have received bids from some of the prestigious companies,” Mr Daniel said.
Unlike the usual practice, where a mall developer first identifies an anchor client, before starting the construction, Prestige is yet to do that. “We are confident that we will attract the right anchor client as the project progresses,” he said. For the multiplex too, a couple of players including Chennai’s Satyam Cinemas and Delhi’s PVR are in the fray.
Meanwhile, Prestige is also in talks with the Balaji Group for acquiring a nearly 50-ground prime property on the arterial Anna Salai. “Talks are in an advanced level and we plan to develop a 5.5 lakh sq ft IT Park at the site, which originally housed the Sowndarya Nursery,” Mr Daniel said, while adding that it will be an outright acquisition and not a joint development, as in the case of the Vadapalani mall cum multiplex project.
Source : Economic Times