DLF, the country’s largest real estate developer, is planning to bring its mall assets under separate special purpose vehicles (SPVs) so that it can sell stakes in them and convert them into real estate investment trusts (REITs) in the future.
The company could raise as much as $1 billion through this route, a executive aware of the plan said.
DLF owns half-a-dozen malls with a total area of 3.6 million sq ft and, including its office properties, the company earns a rental income of Rs 2,400 crore. The value of its rental assets is about Rs 22,700 crore, according to Axis Capital. “We will value the malls that earn lease rents and gradually bring them under an SPV. Each SPV can be brought under a REIT,” said Rajeev Talwar, chief executive officer of DLF.
Talwar said after the asset was transferred to an SPV, partners would come and invest money. “Both partners will price the REIT and list it. In each SPV, there can be one or more assets,” he added. In March, DLF sold its shopping mall at Saket in New Delhi to its wholly owned subsidiary for Rs 904.5 crore as part of a strategy to consolidate and monetise rental assets.
Value unlocking through REITs is expected to help reduce the debt of DLF, which is around Rs 21,400 crore. “We are in talks with investors but it will be a drawn out process,” Talwar said. DLF’s promoters are also in talks with as 25 global institutional investors to sell their 40 per cent stake in the company’s rental arm DLF Cyber City Developers. According to estimates, the deal could be worth around Rs 12,000 crore.
According to Jones Lang LaSalle, the country has 75.2 million sq ft of mall properties and a vacancy rate of 17.2 per cent. The vacancy rate is expected to remain steady till 2018. On April 27, DLF opened Mall of India in Noida, a 2 million sq ft retail and entertainment space.
Besides the one in Saket, DLF has malls like Emporio and Promenade in Vasant Kunj, City Centre in Chandigarh and the Mall of India in Noida. DLF plans to open a luxury mall of 200,000 sq ft in Chanakyapuri and will develop another one in Gurgaon this year.
Credits Business Standard