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Canada-based global real estate giant Brookfield has offered to acquire Candor Investments, a fully-owned Unitech Corporate Parks (UCP) Plc subsidiary that owns stakes in real estate projects in the National Capital Region (NCR) and Kolkata.
According to an exclusivity agreement signed between Brookfield and UCP, an entity listed on the Alternative Investment Market of the London Stock Exchange (LSE), the transaction is to be concluded in 45 days. Candor Investments, through its subsidiaries, holds a 60 per cent stake in six properties, valued at Rs 10,000 crore — two in Gurgaon, three in Noida and one in Kolkata — while the Unitech group owns rest of the equity.
UCP had raised about £360 million (Rs 3,597 crore) in December 2006 through an initial public offering on LSE, mainly to invest in these six projects. In a statement issued on Thursday, UCP said its board was approached by a third party, expressing interest in a potential acquisition of Candor Investments, and that it was currently in discussions for a possible sale of this subsidiary.
UCP has a market capitalisation of around £150 million and analysts say Brookfield could pay between £150 million (Rs 1,498 crore) and £200 million (Rs 1,997 crore) after a premium. The Unitech group already owns a 13.69 per cent stake in UCP, while Brookfield Asset Management has a 16.65 per cent stake; the rest is owned by various financial investors. So, from this deal, Unitech could get between Rs 206 crore and Rs 275 crore.
Besides, Unitech is also in talks with Brookfield to sell in a phased manner its own stake in the six properties after these are developed. Of the 21 million square feet of lettable space that can be built on these properties, the company is at present selling 16 million sq ft of space in the market. It has already received commitments from companies for lease of 10 million sq ft — eight million sq ft has already been delivered.
After all other assets are developed and monetised, the Unitech group could get a little more than Rs 4,000 crore for its 40 per cent stake in the six realty assets. This might come in handy for the company in its aggressive attempt to reduce its overall debt, which has come down to around Rs 6,200 crore and could fall substantially when the entire deal has been concluded.
UCP also said that separate discussions for sale of one of its special economic zones (SEZs) in Gurgaon, announced in December last year, had been suspended. The company had held talks with private equity funds Blackstone and Government of Singapore Investment Corporation for this.
However, the UCP statement added there was no certainty that the current talks would lead to a transaction or what could be the timing or terms of an agreement.
On its part, Unitech said, besides UCP, “the Unitech group has also been approached by the third party for a strategic alliance to carry out the remaining development of the IT SEZs/parks currently under development, along with the potential acquisition of its stake in certain IT SEZs/parks.”
Unitech, which has also put two of its hotel properties on the block, expects to get over Rs 1,000 crore from these sales. Also, it recently sold a plot in South India for Rs 130 crore. These proceeds are going to help the company pay off its dues to Life Insurance Corporation.
Brookfield is one of the world’s largest real estate companies and has $175 billion worth of assets under management. Brookfield Property Group, its investment platform, has assets worth $108 billion under management. It also has a presence in India through a joint venture with the Piramals (Peninsula Land) for a real estate fund. Brookfield Asset Management has acquired the Indian AMC business of AIG Global Real Estate. Also, Brookfield and Sumitomo Bank are partners in the Kotak Infrastructure fund.
