Ivanhoé Cambridge, the real estate arm of Caisse de dépôt et placement du Québec, has teamed up with Indian conglomerate Piramal Enterprises to invest $250 million equity in Indian residential developments.
Piramal, through its Mumbai-based fund manager Piramal Fund Management, will commit an additional amount alongside and co-invest between 25 percent and 50 percent of each transaction.
The partnership is expected to write checks of at least $20 million for between six and eight deals from which it is targeting returns north of 20 percent during the partnership’s 10-year life, Khushru Jijina, managing director, Piramal Fund Management, told PERE.
The capital will be made available to a selective list of Grade A developers and the investment focus will include residential developments in the Mumbai Metropolitan Region, Delhi (NCR), Bangalore, Pune and Chennai.
“We believe that the timing is opportune for the provision of both pure and preferred equity capital at an early stage in the project life cycle. Such equity funding with Tier 1 development partners will enable us to deploy capital over a longer time horizon and facilitate participation in larger projects with the ability to generate returns across real estate cycles,” said Jijina.
Piramal Fund Management and its Structured Finance Group (SFG) provides senior and mezzanine growth capital to various businesses across varied sectors in India. The total funds under management under these businesses are $4.4 billion. The firm also has strategic alliances with top global funds such as APG Asset Management, Bain Capital Credit and CPPIB Credit Investment.
However, according to Jijina, this is the first “serious equity money” coming to India from an international, institutional investor for development since after the global financial crisis.
“Why equity and not debt? Ask any developer in the last few years and they will tell you the problem was debt was available and not equity. This will definitely fill the gap to a certain extent. I think the requirement is much more,” he says.
Daniel Fournier, chairman and chief executive, Ivanhoé Cambridge said: “We are excited to participate in India’s success story alongside one of India’s leading fund managers. Piramal, with its long experience, impressive track record and strong relationship with India’s top developers, will certainly play a key part in the success of this important investment. India’s compelling demographic and economic fundamentals, combined with supportive government policies bode well for a long-term residential development strategy such as this one.”