Altico Capital to finance 450 cr project in Mumbai

The non-banking financial company (NBFC) of Asia-focused investor Clearwater Capital Partners LLC, Altico Capital India Ltd. Has given Rs.450 crore of debt financing to an upcoming residential project in Mazgaon, south Mumbai.

The project will be a joint venture of Radius Developers and Sumer Group which is yet to be launched.  Under the plan, five 65-storey residential towers measuring 3 million sq. ft of saleable area will be developed.

The transaction is structured in the form of non-convertible debentures (NCD) with a four-year tenor, where the funds will be disbursed in tranches. The finance will be used to acquire the project from the land owner, settle tenants on the land and to start project construction.

Funding to the realty sector in the past three years has largely been in the form of structured debt financing, with both private equity (PE) funds and NBFCs aggressively lending to developers, giving the latter a much-needed source of capital especially when cash inflows have dried up due to weak sales.

“This was an exciting opportunity to back one of the most promising real estate entrepreneurs in Mumbai early in his new corporate evolution,” said Karthik Athreya, managing director of Altico Capital. “Our business is built around the significant existing opportunity to meet the capital needs of capable developers, who are in their growth stage with multiple projects that can enable their own growth besides repaying our debt at attractive IRRs (internal rate of returns) of over 18%,” he added.

Speaking on the deal, Sanjay chhabria, Managing Director of Radius Developers said, “We plan to launch the project early next year. The property is at a great location in south Mumbai and is ideal for residential development.”

Structured debt transactions in real estate are getting larger, sometimes with PE funds and NBFCs collaborating to do bigger-sized deals to meet developers’ demand for capital.

Bank of America is shifting its India headquarters from Nariman Point to the Bandra-Kurla Complex (BKC), marking another milestone in the steady movement of businesses to the suburbs. The bank is expected to move next year. The deal reflects renewed interest in BKC,” said a source familiar with the deal.

The corporate houses and financial institutions prefer BKC because of its central location, good connectivity, superior quality of the properties and adequate parking facilities. In BKC, there is ample car parking space, good power backup and hi-tech AC systems — something Nariman Point buildings lack. “The Bank of America has signed a letter of intent with Sanjay Chhabria of Radius Developers to take on lease 1.30 lakh sq ft in OneBKC, a brand new commercial tower in BKC. It will occupy floors 16, 17, 18 and 19 of the building once it moves in next year. It may be mentioned that the deal has been structured with a low rent of approximately Rs 230 a sq ft per month, but with a high advance deposit of over 18 months’ rent. The lease works out to around Rs 3 crore a month. The deal was brokered by property consultancy firm CBRE. Both Radius Developers and CBRE were unavailable for comment. In 2011, Bank of America took on lease two more floors spread over 30,000 sq ft in Express Towers at the rate of Rs 310 a sq ft per month, or Rs 93 lakh. Property experts had then described it as the largest office space in Nariman Point to be taken on lease. At that time, the bank had decided to expand operations in Nariman Point itself. But it later realised that the new BKC buildings were far superior in infrastructure to the towers at Nariman Point, most of which were constructed over four decades ago. When ABN Amro Bank had renewed its lease for an office on the third floor of Nariman Point’s 12-storey Sakhar Bhavan at the rate of Rs 500 a sq ft per month in 2007, the Rs 500 barrier was touched in this business district at the height of the property boom. Though the rates are less than half, over 20% of Nariman Point’s office space said to be vacant today.