ASIA NEWS: Breaking the mold

Mumbai-based developer Godrej Properties Limited is establishing a separate fund management subsidiary in an ambitious move to expand its offshore capital raising capabilities.

Godrej Fund Management (GFM), which will be based in Singapore, will manage all existing and future real estate investment vehicles raised by the group. Karan Bolaria, who headed fund management and capital strategy functions within Godrej Properties, will be taking helm at GFM, which will have a staff of around two to four people in Singapore in addition to a team operating in India.

The operational announcement was made to coincide with the launch of a $275 million Godrej Residential Investment Program (GRIP) II, the second joint venture partnership for mid-income residential development in India between Godrej Properties, and a consortium of offshore investors led by Dutch pension asset manager APG Asset Management. APG is understood to have close to a 50 percent interest in GRIP II. Godrej Properties holds a 20 percent stake.

Godrej Properties’ decision to launch a standalone fund investment management business is not a common trend in the Indian real estate industry. Most developers in the country do fund management operations in-house, and on an ad-hoc basis, for their joint venture partnerships with international investors. However, these developers have not built a separate institutionalized platform for capital raising.

Discussing the strategy for GFM, Bolaria says that separate accounts and smaller-sized funds would form part of the firm’s investment thesis going forward.
“We are definitely considering launching something for the office sector and more investment-type strategies on the residential side that do not involve development,” he said.

Within the next year and a half, GFM is planning to have $1 billion in assets under management. While the bulk of investments will be in India, Bolaria does not rule out investing in markets such as Singapore.

However some industry observers PERE spoke to are also raising questions about a potential conflict of interest arising from the creation of such a fund management subsidiary by a listed property firm such as Godrej. For example, does the arrangement give the listed developer’s projects an automatic first right to all the capital raised by its fund management subsidiary? Godrej did not respond to emails seeking clarification on this issue.