DLF to raise $1 bn overseas

Real-estate billionaire Kushal Pal Singh's DLF group is raising $1 billion from investors, including Lehman Brothers Holdings Inc., and may sell shares in property trusts overseas.

"Right now, the two logical markets would be Singapore and West Asia," DLF Vice Chairman Rajiv Singh said in an interview today.

"These are two markets where there's a lot of demand for the kind of assets" the company does business in.

DLF Assets Pvt, which will raise the money to bid for the assets of parent DLF and others, will turn itself into a real estate investment trust when the Indian government allows such vehicles, Rajiv Singh said. Goldman Sachs Group Inc estimates Asian property owners are planning to sell shares in as many as 15 REITs in a year as real estate offers twice the average return of stocks.

Shares of Singh's DLF today rose 8.6 per cent on the first day of trading after India's biggest initial public offering, which raised $2.27 billion last month.

DLF Assets may need as much as $1.5 billion each year to buy properties from developers other than the group company, Chief Financial Officer Ramesh Sanka said earlier.

It acquired 5.5 million square feet of property from DLF Ltd. and plans to buy an additional 7 million square feet this year. It will obtain 10 million square feet each year, he said.

"The money is barely sufficient for one quarter of growth,'' Sanka said.

REITs raise money from equity investors to buy properties from shopping malls to business parks. They are usually required by law to pay most of their profit as dividends. Investors prefer REITs because investing in these funds is less risky than putting money directly into a real-estate project.

New money for property investments is coming from the public REIT market, big developers in China and India and private-equity funds, including those raised by investment banks, Michael Smith, head of Asian real estate investment banking at Goldman Sachs, said on June 26.

DLF Assets has raised $700 million and has commitments for $300 million, Rajiv Singh said in the interview. Lehman Brothers invested $200 million, D.E. Shaw, the hedge fund manager, has put in $400 million and the founders of DLF Ltd. are providing $100 million, the company said. India may announce rules allowing REITs in the next 12 months, Rajiv Singh said.

"It's a timing issue but most likely we'll explore both possibilities," Rajiv Singh said. "If the Indian regulations do not permit at all, then we would just do an overseas listing."