Old Mutual, ICS float $500 mn realty fund

After life insurance and property services, $4.5-billion Old Mutual is planning to invest in retail-related real estate assets in India through a property fund.

The property arm, the South Africa-based Old Mutual Investment Group Property Investments (OMIGPI) and a Mumbai-based real estate company ICS Realty, have promoted a $500 million property fund, which is expected to close by March 31.

The fund, called Triangle India Real Estate Fund, is aiming at investors (both high net worth individuals and institutions) in Europe, West Asia and South Africa.

''We are targeting returns of 20 per cent to 30 per cent,'' said Deep Kantawala, director of Property Zone, the advisor to the fund in India. The fund has an eight-year term, with an option to extend it by two years.

Though the fund has a mandate to invest in retail, commercial and hospitality sectors, it would put 60 per cent of its corpus in the retail sector to take advantage of the merchandising boom in the country.

''There is a huge opportunity in Indian retail sector and the promoters wanted to capitalise on their expertise in this space,'' said Kantawala.

According to retail consultancy Technopak, the Indian retail market is likely to grow by 69 per cent to $590 billion by 2012 and the share of organised retail may increase to $97 billion or 16.44 per from a paltry 3.43 per cent on Tuesday.

Technopak estimates that the country would need a mall space of 700 million sq feet in four years, while only 200 million sq feet is expected to come up by that time, creating a gap of 400 to 500 sq feet.

According to Indian Venture Capital Journal, nearly 30 per cent of private equity funds are expected to flow into retail in a couple of years.

Singapore's mall developer CapitaLand has formed a joint venture with the Rs 350-crore Kshitij Venture Capital fund and Pantaloon Retail to set up over 50 malls in the country.

Prozone, the real estate arm of retailer Provogue, has formed a joint venture with the UK's Liberty International to build 12 malls in tier-II cities across the country.

Old Mutual Properties manages 68 malls worldwide with over 4500 tenants, including three super-regional and 11 regional malls and its projects extend to Africa, central and eastern Europe and West Asia.

Old Mutual Properties has also set up Pioneer Property Zone, which develops properties and manages shopping centres, in a joint venture with ICS Realty, a part of ICS group promoted by businessmen Deepak Premnarayen and Subhash Thakrar.

''When we came in, we didn't find enough good retail assets to invest in. So, we thought of creating a property management company which can identify and develop these assets for the fund to invest in,'' said Ian Watt, advisor, Pioneer Property Zone.

ICS has several joint ventures with international companies.

Intertoll ICS, a joint venture between Intertoll of South Africa and ICS, was aimed at doing business in toll roads. However, the JV has exited from the roads business to focus on realty.

Interpark ICS is a partnership between Secure Parking of Australia and ICS, which provides car parking services. ICS has also tied up with African company Bentel Associates International to form Bentel Associates Realty Design Consultants, which provides retail architecture services.

Old Mutual has a 26 per cent shareholding in the life insurance company Kotak Mahindra Old Mutual Life Insurance.