German real estate fund MPC Synergy has picked up equity in various special purpose vehicles (SPVs) floated by real estate developer Phoenix Mills for Rs 1,300 crore (ie $200 million). The deal is the second-largest foreign direct investment (FDI) in the Indian real estate market.
The transaction is taking place at a time when many real estate and private equity funds have either put on hold their plans in the Indian market or are trying to sell the investments. MPC Synergy is a joint venture between Germany-based MPC Capital and Switzerland-based Synegy Asset Management.
The real estate fund has picked up equity stakes ranging from 10% to 49% in 21 projects promoted by Phoenix Mills and its two subsidiaries — Entertainment World Developers and Big Apple — in Tier I and Tier II cities. These projects, subsidiaries of Phoenix Mills, are coming up in cities like Mumbai, Chennai, Pune, Bangalore, Indore, Jabalpur, Raipur, Udaipur and Chandigarh.
Each project is structured as a separate corporate entity in the form of an SPV. “Each project is FDI compliant. Fifteen are being developed and six are in the pipeline,” Atul Ruia, director, Phoenix Mills, told ET.
Deutsche Bank’s 25% equity purchase in an SPV owned by Mumbai-based developer Lodha Group for $425 million is the largest FDI compliant real estate deal in India.
Foreign investment in the Indian real estate sector is subject to various rules including a minimum area over which the project will have to be developed.
Mr Ruia said a significant part of the investment will go towards the development of four luxury hotels under the Phoenix group while the rest will be allocated to develop retail-led real estate assets in the emerging consumption centres. Two of the luxury hotels, in Mumbai and Chennai, will be developed under the Shangri-La brand.
Phoenix Mills, located in central Mumbai, was the first major mill property to be redeveloped after the demise of the city’s textile industry. The current properties inside the mill’s premises are a mixture of offices, shops and restaurants. It has developed high-end residential properties, including Phoenix Towers, in central Mumbai.
The Shangri-La hotel, a luxury mall and a multiplex are currently under construction inside Phoenix Mills. Another major real estate project, which will house retailers, is coming up in Kurla, on the land which used to house Mukund Steel’s manufacturing facility.
MPC Capital’s managing director Bert Manke said: “The MPC group is bullish on the Indian economy as the Indian consumer is now confident and willing to spend. The Indian hospitality space also offers tremendous growth opportunities, even in tire II cities where the consumers have latent spending power and is still untapped by quality retail products.”
“Fifteen projects have been currently identified where approximately 70% of the investment will be deployed and six more are in the pipeline, which will be consuming approximately 30% of the investment,” Jay Oberai, chairman MPC Synergy Real Estate said.
Collins Stewart Inga were the advisors to Phoenix.The MPC Capital Group operates in business segments like shipping, real estate and private equity. It manages yield-oriented investments for high net worth and institutional investors. The Hamburg-based group has been the German market leader for closed-end investment models, according to Mr Manke. As on December 2007, the German funds investments were valued at euros 16.6 billion.
Source: Economic Times