Kotak completes $117m Mumbai sale to international fund

Kotak Realty Fund, the real estate fund business of Mumbai-based Kotak Investment Advisors, has sold Peepal Tree Properties, a company which owns a large IT park near Mumbai, to Tata Realty and Infrastructure, for $117 million.
 
The deal for the 786,000 square foot IT park marked ‘many firsts’ Kotak said. In addition to being the ‘largest real estate exit in the Indian market by a fund’ , the firm said the exit marked the first office property sale by an Indian fund and was one of the first foreign direct investments into an income-producing real estate asset.
 
In an interview with PERE prior to the sale, Kotak’s chief executive officer Srini Wasan said a sale of the asset, which had come close before, would be a ‘home run’ for the firm and for the country’s wider real estate fund management market, which has had little comparable exiting activity to speak of until now.
 
The property was acquired in 2008 for $47 million, just $18 million of which was equity from Kotak.
 
Hari Krishna, director of Kotak Realty Fund said the sale provided institutional investors with a rare example of a fund manager leasing, operating and exiting an investment profitably. He said: “A US$117 million exit of an office property in India demonstrates that the market is getting deeper and signals the return of institutional capital.”
 
The asset, in the Mumbai suburb of Goregaon, is 96 percent-leased to occupiers including Accenture, BNP Paribas, Tata AIG and BOB Legal and General.
 
The sale follows something of a hiatus by international institutional investors from Indian real estate following the global financial crisis.

The immediate years leading up to the crisis saw the introduction of numerous funds, by international managers particularly, aiming to capitalise on India’s economic growth. Many of these have since dissipated, however, as institutions scaled back the more opportunistic elements of their investment strategies. Their absence was compounded by few successful exits by Indian real estate funds, which resulted in the formation of a more domestic investment market.
 
Tata Realty and Infrastructure was launched in 2007 as a subsidiary of Tata Sons, the holding company of global conglomerate Tata Group, to invest in real estate and infrastructure projects in India. The firm purchased Peepal Tree through its Tata Realty Initiatives Fund 1, which was raised as an offshore fund with capital from international investors.
 
Kotak Realty Fund sold the asset from its onshore Kotak India Real Estate Fund I, which closed on approximately $100 million. Kotak said the sale enabled it to return all the fund’s equity to investors.
 
The firm, which was formed in 2005, also manages another domestic fund, Kotak Alternate Opportunities India Fund which was closed with $331 million in equity and Kotak India Realty Fund, an offshore vehicle with $265 million of equity.
 
Kotak Investment Advisors is part of the alternative assets business of the Kotak Group.