Looks for a Rs 900-1,000 crore deal; discussions with global realty funds stuck as slowdown upsets valuation matching.
Textiles’ major Alok Industries has started talks with major corporate groups and high net worth individuals (HNIs) to sell its property at Peninsula Business Park in central Mumbai, after a hiatus in talks with global real estate funds.
Alok’s talks with the US-based Tishman Speyer, the largest global real estate fund, failed due to valuation mismatch and regulatory concerns. According to earlier reports, the funds of Morgan Stanley and Singapore Government-owned GIC were also engaged in talks with Alok to acquire the property.
According to persons in the know, Alok is looking for a deal in the range of Rs 900-1,000 crore. Tower B at Peninsula Business Park, Lower Parel, owned by Alok, aggregates around 650,000 sq ft. Alok had acquired the office premise which was developed by Peninsula Land Holdings at Dawn Mills.
Sunil Khandelwal, chief financial officer of Alok Industries, said: “There have been various funds evaluating the premises. These apparently need clarifications on certain regulations governing purchase of properties under the FDI (foreign direct investment) route, which is expected to take time.”
However, Alok feels compelled to sell the property to clear mounting debt. As on September, total debt was Rs 9,933 crore.
"Though we are in talks with a few corporates and HNIs for sale/lease, no deal has been signed on yet," Khandelwal added.
According to realty experts, the current slowdown in real estate space will cause a delay in concluding deals. "There is a disconnect between the developer/owner and prospective buyers. Alok bought at high rates during 2008 and they want to sell at the same valuations. Whereas, buyers are looking at lower valuations, in tune with current market conditions,” said a senior executive of a global property consultant.
The decrease in office rentals also forces owners to sell the prime properties in Mumbai. Mumbai has grade-A office stock of 67 million sq ft, with a vacancy of about 13 million sq ft, according to property consultant Jones Lang LaSalle (JLL). The office vacancy rate has increased to 19 per cent, making it 14 consecutive quarters of increased vacancy.
“Office rentals have come down significantly. That is why developers want to liquidate the asset and invest somewhere else. The assets have appreciated as expected,” says Raja Seetharaman, managing director, India, APERON TCN Worldwide.
Ackruti City, the Mumbai-based property developer, is looking to sell offices in three of its properties—Ackruti Star, Ackruti Viva and Ackruti Solaris —in the Andheri suburb. The Wadhwa group, one of the largest unlisted realty companies in Mumbai, is also selling floors in its soon-to-be finished ‘The Capital’ project in the Bandra Kurla Complex, central Mumbai. Further, it is in talks with large corporates to sell individual floors.
DLF, the country's largest property developer, is also engaged in talks to sell its information technology special economic zones in Pune and Noida.
