TSI Ventures to pump in $1.5 bn

Realty developer to cash in on IT, BPO sectors' demand for office space.

TSI Ventures, a joint venture between leading global real estate operating company Tishman Speyer and ICICI Venture, is set to pump $1.5 billion into real estate development over four years.

The 50:50 JV will access separate funds being raised by the two promoters to create a "combined fund in excess of $500 million", according to Prakash Gurbaxani, CEO of TSI Ventures. The joint venture will leverage this with debt in the ratio of 1:2 to create an investment corpus of $1.5 billion.

TSI Ventures will source funds, strike deals, develop properties and may even manage some across the real estate spectrum of commercial, residential and mixed use properties.

"It will be the largest and only fund with this kind of a presence in all kinds of properties. The development role of the JV entity will give it control on quality and customer experience and help it create a long-term brand," Gurbaxani added.

TSI Ventures' nearest competitor with a similar business model is Singapore-based Ascendas, which is only into IT parks and has announced it will create over $500 million in asset value in seven years. TSI Ventures expects to create asset valued at over $2 billion in five years.

Each project will be executed through a dedicated special purpose vehicle (SPV) and TSI Ventures will charge the SPV a fee. Each project will create an average of around 2 million sq ft, in the range of 1-5 million sq ft.

To put it in perspective, the largest single-office space complex in India, ITPL in Bangalore, now owned by Ascendas, has 3 million sq ft.

The $1.5 billion investment that TSI Ventures will channel will create 20 million sq ft of real estate. India currently boasts 90 million A-class real estate, while New York city alone has 320 million sq ft and Shanghai 75 million sq ft.

TSI Ventures sees no problem for the space it will create, as, according to the latest projections, the Indian IT and BPO sectors alone will need an additional 300 million sq ft by 2010 for office, home, retail and hospitality.

The opportunity for foreign investment in real estate is likely to be even greater since current regulatory restrictions not allowing foreign entities to trade in real estate are expected to be relaxed over time.

TSI Ventures proposes to leverage its relationship with Tishman Speyer, one of the world's leading fully-integrated real estate companies that represents over 74 million sq ft valued at $ 20 billion.

"Tishman has built or owns some of the marquee real estate properties around the world like the Rockefeller Center in New York and the Sony Center in Berlin," Gurbaxani said.

TSI Ventures' first few deals are likely to be in Bangalore, Hyderabad, Pune and Kolkata. It also has on its radar Mumbai, Delhi and Chennai.

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REAL PLANS

Promoters Tishman Speyer and ICICI Venture to create fund exceeding $500 million

TSI Ventures to leverage this with debt in the ratio of 1:2 to create a corpus of $1.5 billion

Company to deal in commercial, residential and mixed use properties

Each project to be executed through a dedicated SPV, which will be charged a fee