Will retire Rs 6,000-crore debt after Blackstone deal: Prestige Estates CMD

The total portfolio is expected to be around 21 million square feet (mn sq ft) of completed and under construction projects, said CMD Razack

Bengaluru-based Prestige Estates Projects has entered the last leg of a deal to sell a large portfolio of its commercial assets to US-based private equity fund manager Blackstone for an enterprise value of Rs 9,160 crore. The total portfolio is expected to be around 21 million square feet (mn sq ft) of completed and under construction projects. IRFAN RAZACK, chairman and managing director of the company, speaks to Raghavendra Kamath about the deal and the company’s plans. Edited excerpts:

What was the idea behind selling the assets?

Since we are in the process of doing a lot of capex projects in Mumbai and Delhi, this cash will give us growth capital. Also the existing assets will be replaced by brand new ones. Around Rs 6,000 crore of debt will be retired after this deal and we will be left with Rs 4,000 crore surplus for new projects.

Why did you choose to go for a deal with a PE fund and not for a REIT (realty investment trust)?

It started off with a discussion and ended in a deal. It could have been a REIT. There were talks on this internally. We have done a 50:50 JV for under constr­uction projects. For malls, we have given 85 per cent stake and will continue to hold 15 per cent, which we will tag along with the fund in case we go in for a REIT.

What are you building in Mumbai and Pune?

We are building over 4 mn sq ft in the BKC area of Mumbai. BKC I is a joint venture project with DB Realty for 2 mn sq ft and BKC II is a JV project with Avinash Bhonsle Group for 2 mn sq ft. We are looking at a rental potential of Rs 300 per sq ft in these projects. In the Mahalaxmi area, we are building 2 ms sq ft of office development. We have also got the National Company Law Tribunal clearance for a 6 mn sq ft residential development in Mulund area of Mumbai. It has a big potential. In Pune, we are doing an 800,000 sq ft development in Kharadi area. We are doing a residential project in Noida, Prestige Bougai­nvilla, Gardens, which we will launch in December once RERA and all approvals are in place.

Most of the big developers who planned to go national failed in the past due to various issues. What gave you the confidence in taking on projects in cities in western and northern India?

We have been doing business in different cities and are fairly established in them. We have done office and reside­ntial in Hyderabad. In Chennai, we did offices. Opportunity came in Mumbai and Delhi. We thought about it because these were city-centric and prime projects. We have a brand and an execution and management bandwidth. We should be able to succeed. We want to grow slowly but surely.

Are you looking to buy new land parcels and brownfield projects?

We have enough on the plate at the moment. We want to consol­idate and have less reliance on debt and increase the profitability of the company. Residential sales have bounced back. Post Covid, we are getting a lot of sales in luxury projects such as Prestige White Meadows and Prestige Golfshire. We are confident of clearing all the inventory in these projects in the next few months.

How has been your experience in the commercial property segment during the Covid period?

The first thing about commercial office property is wherever the leases are in place, the tenants continue to pay rent and our collections are near 100 per cent for these leased-out premises. We also confirmed and signed a lease with Accenture for almost 800,000 sq ft. We have signed a lease for a building with OLA Technologies for 450,000 sq ft and our CBD property Minsk Square also has been leased out to an electronic giant, area of the building is 430,000 sq ft. 

There are also a lot of new requests for proposal being floated for large spaces and I believe going forward there will be more demand for office spaces, which will keep coming and those deals could be closed after June 2021.

How are the residential sales faring?

Residential sales are faring very well. In the September quarter, we had sales of approximately Rs 1,123 crore of 1.77 mn sq ft of built-up area. October and November have also been exceedingly good. We also had the annual KEYS event in October, and the response exceeded our expectations and targets. We launched Prestige Tranquil in Hyderabad last week, which has found favor and we have done more than 300 sales in the first week alone. Hence, we expect the December quarter to be outstanding as far as sales are concerned.