Puravankara’s talks with private equity investors for commercial assets flounder

January 27, 2023

Real estate developer Puravankara Ltd’s attempts to get a private equity investor on board to create a funding platform to grow its commercial assets portfolio has run into difficulties, with differences over valuations, quality of assets, land parcels and locations.

“Conversations are ongoing…we are having conversations on different types of structures,” Chief Executive Officer Abhishek Kapoor told businessline, adding that the company would keep the talks going. “In time to come we will have something,” he said. The plan is to set up a funding platform with the investor, that will invest to expand its office portfolio.

Sources with knowledge of the discussions said that the company doesn’t have a ‘decent’ portfolio of assets to showcase and no land parcels in prominent areas of Bengaluru “ and its commercial assets business was not significant. They said the company has been talking to global private equity firms such as Goldman Sachs, Mitsui & Co’s private equity arm and some other global funds.

The main sticking point between Puravankara and prospective investors is on the valuations and the quality of the sites from the point of view of steady lease rent cashflows. Sources said that from a valuation perspective any prospective investor would want to come in cheap, considering that the company doesn’t have substantial assets to offer in terms of locations, and land parcels.

Among Puravankara’s commercial portfolio, it has completed projects in Chennai’s Old Madras Road, Hyderabad at Kondapur and Bengaluru’s Electronic City. A project in Bengaluru’s Kanakapura of 800,000 square feet is coming up, the plan for which is to sell the space. Another 2.1 million square feet of commercial space is in the works such as Pune, Mumbai and Bengaluru.

Kapoor said that it was a matter of perception. “I may be optimistic about certain locations, others may not be. That will also reflect on the numbers.” He also said that this year may be challenging for commercial real estate “given the global scenario, so in that situation there may be some hesitation.”

Lured by the returns that early investors such as Blackstone, Brookfield and Canada’s pensions funds have been getting from real estate investments in India, other global funds are also eager to take part, though much of existing Grade A office assets have already been snapped up. Funds are tying up with leading developers to acquire land parcels and build assets.

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