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Emaar may Land $800 m From PE Funds for 3 SPVS
Friday, May 02, 2008

Goldman Sachs, Deutsche Bank and another financial investor are likely to make a combined investment of $800 million in three special purpose vehicles (SPVs) being created by real estate major Emaar MGF. Each SPV will have one financial investor, who will hold minority stake.

According to sources, the Delhi-based developer is in advanced talks with private equity players and is likely to close three separate deals in a month. An Emaar MGF spokeswoman declined comment on the development. The deals, when they materialize, will be the first major fund flow into the real estate firm since it withdrew its IPO in February.

Emaar MGF, 40% owned by Dubai-based leading property developer Emaar and 56% by Delhi-based MGF, was forced to withdraw its Rs 7,000-crore offering-the third largest in the history of the country-due to poor market sentiment.

Since then, the market has lost steam on global cues, leading to dramatic erosion in the market cap of real estate firms. Realty biggies such as DLF and Unitech have lost 45% and 50%, respectively, of their market cap while smaller players such as Parsvnath and Omaxe have seen whopping two third erosion in their market cap from their January peaks.

Poor market sentiment has also forced DLF, Unitech and Indiabulls to postpone the Singapore listing of their real estate investment trusts. Though the flow of funds into the real estate sector has not stopped, developers, including unlisted ones, are reluctant to go in for equity dilution at the parent company level fearing lower valuations. This has prompted most companies to look for private equity funding at project or SPV level.

Emaar MGF too is raising funds at the SPV level because the current market situation may not have given it the expected valuation. The three SPVs, where PE money is likely to come in, are expected to take up projects across housing, retail and office space development.

Emaar's 3 SPVs to develop projects in housing, retail and office. Each SPV to have one PE investor, who will hold minority stake. The 3 deals may be inked in a month PE deals to be first major fund flow into Emaar since it withdrew its Rs 7,000-crore IPO in February due to poor investor response. Emaar has developed a 3,000-acre integrated township in Mohali, a 531-acre township in Hyderabad and a 14-acre residential project in Chennai. It is also executing the Commonwealth Games village project. It plans to develop more than 200 hotels over 7-9 years.

Emaar has big projects on hand. The exact projects to be undertaken by these SPVs couldn't be ascertained, but they would be part of projects already being developed by Emaar MGF. Some of the larger projects the company has undertaken include a 3,000-acre integrated township in Mohali, a 531-acre integrated township in Hyderabad and a 14-acre residential project in Chennai.

The company is also executing the prestigious Commonwealth Games village project, where it is developing a 27.7-acre residential complex with an estimated saleable area of 1.8 million sq ft. The company also plans to develop more than 200 hotels over 7-9 years. It has two equal JVs with Accor for 100 budget hotels and Premier Inn for 80 hotels. The company has also entered into separate management tie-ups with Hyatt, Intercontinental and JW Marriott to run 26 hotels.


 

 

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