Religare buys IndiaReit fund for Rs400 crore

As the realty party begins to wind down, India-specific realty private equity funds seem heading for the exit door.

Among these, Sun-Apollo Real Estate Advisors, which had raised $630 million in 2007, is on the block, said two people familiar with the deal.

And Religare Enterprises is set to buy IndiaReit Fund Advisors, the Ajay Piramal group entity, for Rs400 crore, said a third person who is directly involved in the deal said.

Religare and Piramals have signed the term sheet finalising a sale, the source said.

IndiaReit manages a portfolio of Rs4,500 crore.

Sun is a joint venture between Apollo Real Estate Advisors (Area) Property Partners of the US and the Sun Group promoted by the Khemka family.

“Sun-Apollo wants to sell to an international buyer. They are in talks with an international fund but it’s too early to say if a deal is in the offing,” one of the people said.

But Prakash Kalothia, CEO & managing director, Sun-Apollo Real Estate Advisors, denied any plans to sell out.

“This is not at all correct. In fact, both the promoters are highly committed to the long-term and there is no reason for them to sell,” Kalothia said.

On the other hand, Ajay Piramal is selling because he is himself getting into real estate big time.

“This would have led to a conflict of interest. The deal has been in the market for some time but the transaction stands concluded now,” the person involved in the deal said.

Ramesh Jogani, managing director of the IndiaReit, was not available for comment as he is travelling in Mauritius.

The party for realty funds started to wind down after the financial crisis in the US.

Having committed the sky to investors, the advisor community has been busy taking stock of their the realty assets which haven’t been performing the way they were envisaged to, said one source.

As a result, the non-performers are being acquired by bigger players, he said.
Saffron Assets Advisors Pvt Ltd is one such example. Industry sources said participating limited partners of the fund had told its managers to stop investing post the downturn that hit Indian realty sector back in 2008.

“The money invested in realty assets wasn’t doing terribly well. Then came a stage when the investors lost confidence in some key managers of the fund and that’s when the hunt for a more suitable manager began,” said an industry source.

Meanwhile, IL&FS Investment Managers (IIML) completed the acquisition of shares of Saffron Assets.

IIML’s subsidiary IL&FS Investment Advisors LLC also completed the merger of Saffron Capital Securities Ltd and Saffron Capital Advisors Ltd with itself.
ILFS will hold 8.75% stake in Saffron Asset Advisor’s assets under management and there is also a clause of performance based payout. The performance-payout timeline is around 12-24 months, said sources.