Brigade Enterprises looks for PE funding to grow its hotels, office portfolio

February 16, 2023

Real estate developer, Brigade Enterprises, is in talks with private equity funds, including Singapore’s GIC, to take on board a funding and strategic partner for its commercial and hotels assets, though nothing has been firmed up yet 

“We are constantly in talks with multiple funds because, in capital-intensive segments, such as commercial or hotels, it makes sense for us to have a partner on board,” Managing Director Pavitra Shankar told businessline. The valuations needed to be right before they could strike a deal, she said. 

Prior to the pandemic, the company had been seeking out a strategic partner who would help grow its hotel portfolio. The hospitality sector, however, was one of the worst to be affected during Covid-19 and those plans were put on the backburner. “Now I think the hotel sector is doing well and the appetite is back, so we are open to it,” Shankar said. 

A funding partner would also come in handy for acquiring land parcels. Last year the company had teamed up with Singapore’s sovereign wealth fund GIC to acquire a 5.5 acre parcel of land from the TVS group for Rs 500 crore. 

Also read:Brigade Enterprises’ Q3 net down 8% to ₹42.68 cr

Commercial portfolio

Its office project, Brigade Twin Towers, spread over 1.3 million square feet is coming up in Bengaluru and ₹300 crore more of capital expenditure is left to be incurred in the project. 

Shankar said that the company was exploring a funding partner for this venture. “We have purchased the land ourselves, we have undertaken all the construction and funded it. So, it’s a question of whether it makes sense to have a partner. Given the right valuation, we would definitely be open to it,” she said. 

The Bengaluru-based realtor has over 7 million square feet of office portfolio of which the bulk is leased out. There are expansion plans. “We are looking out, our land team is constantly evaluating prospects in Bengaluru, Chennai, and Hyderabad,” Shankar said, adding that there were good opportunities to create niche developments. 

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A couple of more office projects are also coming up in Bengaluru, though these are in joint development, she said. 

The commercial segment, which also includes a small retail portfolio of 1.3 million square feet, contributes just over a fifth to the company’s revenue.

Hotels portfolio

Brigade Enterprises has eight operational hotels with 1,500 keys, while a ninth hotel, which was delayed due to the pandemic, is coming up. 

Though the hospitality business contributes just about a tenth to the company’s portfolio, there are plans to expand it, preferably with the help of a private equity funding partner, while there are also plans to monetise the existing portfolio. 

Also read:Airbnb is a lean (and not too) mean money machine

“We have a lot of questions in terms of allocating capital to the hotel sector, which is why if we have to grow it, it would be good to have a partner alongside us,” Shankar said. She added that the company had the ability and expertise to design and build hotels more cost efficiently while it was able to get better room rents too. 

In the December quarter, the hotels segment’s occupancies surpassed pre-Covid levels, while revenue and the average gross operating profit were far in excess of what it was prior to the pandemic. Average room rates were also 6 per cent higher than pre-Covid levels.

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