Prestige Estates to sell 40% stake in rental assets

Bengaluru: India’s second largest listed real estate developer Prestige Estates Projects plans to raise at least $300 million, around Rs 2,000 crore, by selling up to 40% stake in its rent-yielding commercial assets and has drawn interest from Canadian Pension Plan and GIC of Singapore. The southern developer has hired JP Morgan to advise on the deal involving a string of shopping malls and office spaces valued at about Rs 5,000 crore, or $750 million, sources directly familiar with the matter said.

Prestige is likely to sell anywhere between 26% and 40% stake in the income-generating commercial unit, which will be a subsidiary of Prestige Estates. The Bengaluru-headquartered developer recently unveiled a business restructuring to separate residential and commercial assets. With the housing market remaining subdued, top builders are looking at unlocking value from commercial assets to manage cash flows and debt repayments. The country’s largest developer DLF in advanced discussions with global investors to sell a stake rental unit.

Prestige, which last year sold most number of residential units, has Rs 5,500-crore debt on the books.

Prestige was unlikely to put all its commercial properties, especially hospitality assets, into the proposed transaction, sources said. The company — owned by brothers Irfan, Rezwan and Noaman Razacks — has annualized rentals of about Rs 550 crore being generated from office spaces and shopping malls. As of June 30, Prestige had 8.14-million sqft of leased office space yielding annual rental income of Rs 412 crore, and mall portfolio of about 2.85 million sqft generating Rs 116.8 crore.
When contacted, Prestige Estates CFO Venkat K Narayana and JP Morgan declined to comment on speculation. China’s Fosun and Middle East sovereign wealth managers like Abu Dhabi Investment Authority could be among the other potential suitors in the fray. The deal making is in its preliminary days and will have to wait for business restructuring to be completed. Prestige operates six malls under the ‘Forum’ brand across Bangalore, Chennai, Hyderabad and Mangalore while adding Kochi and Mysore to the network soon. Singapore’s CapitaLand is an equal partner in three of these malls and it isn’t clear whether there the two partners would realign shareholding ahead of the transaction.

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