The co-founders of Red Fort Capital, one of India’s leading private equity real estate firms, are in talks to determine whether they will work together on future investment initiatives.
In a letter to a Red Fort investor, obtained by PERE, co-founders and senior managing directors, Parry Singh and Subhash Bedi, responded to recent and increasing speculation in India’s private real estate investment market about a rift between them and a negative fallout for the business.
In the letter they said: “We understand you have heard external communications about a possible breakdown in our relationship, and whether this could have an adverse effect on your investments with Red Fort.”
“We assure you this is not the case. We have been partners for 17 years, and both remain fully committed – contractually and personally – to the Red Fort I and Red Fort II investment platforms.”
The letter concludes: “Although our continuing partnership in future investment platforms has been a matter of discussion between us, we both intend to commit continued, substantial business time to the success of Red Fort I and Red Fort II.”
Red Fort has been among the most successful private real estate investment firms in India, a market that has suffered from a poorly-performing first vintage of investment funds after foreign direct investment was permitted in the country in 2005.
The firm raised $375 million in 2010 for its first fund, Red Fort India Real Estate Fund I, to make investments across office, residential and other property sectors. At the end of 2011, it raised $500 million for its second vehicle, Red Fort India Real Estate Fund II. The vehicles contain 26 investments and are thought to be currently generating IRRs of about 25 percent, placing the firm among the strongest performers in the country.
While the first fund is fully deployed, Red Fort is thought to have approximately $150 million of capital recycled from early deals of the second fund still to be invested within the timeframe of the vehicle’s investment period before it hits the fundraising trail for Fund III.
It is understood that the uncertainty resides in whether Bedi, who currently oversees the management of the firm’s daily operations, will remain with Red Fort for the purposes of a third fund. It had been reported that Red Fort was expecting to launch Fund III sometime this year.
Of further significance, Bedi is not part of Red Fort's plans to raise a core real estate vehicle for income-producing assets in the country. As PERE revealed in 2013, the firm was drawing up plans to selling three large office properties from its opportunity funds into some sort of core vehicle, possibly an open-ended fund or a public REIT. That business, which has the working title of ‘REX’ is being led by solely by Singh.
Red Fort declined to comment.