Blackstone Deal May Be Part Of Plan To Recapitalize KFA
Private equity giant Blackstone has made a Rs 560-crore offer to acquire the rent yielding real estate assets of Vijay Mallyas investment company UB Holdings,the promoter of the grounded Kingfisher Airlines,said sources directly aware of the matter.The deal may be part of the companys plans to recapitalize the airline in which it holds a little more than 24% stake.
The joint offer from Blackstone and technology park developer Embassy Group both have an equal joint venture to acquire office buildings falls slightly short of the asking price and is pending final negotiations.The deal could see Mallya offloading 3.60 lakh sq ft of tenanted office space and 60,000 sq ft of luxury retail thats part of UB City,a 1.6 million mixed use project still under development in the heart of Bangalore.The transaction will not include UB corporate offices and the branded ultra-high end Kingfisher residences.
TOI first reported in May this year that PE biggies,including Blackstone,were evaluating a deal involving real estate business of UB Holdings.
A top UB executive confirmed Blackstone formal bid but added the company has received more than one offer.Sources said another suitor in the fray was southern developer RMZ Corp,backed by baring Private Equity Partners India.
Blackstone may be the front runner even though UB top brass held meetings with RMZ last week.A Blackstone spokesperson declined to comment on speculation. Mallya told TOI he was not aware of any such offers since nothing has come up for his consideration.
Sources said Blackstone offer may be a structured transaction,with the PE financing the deal through a special purpose vehicle of the Embassy Group.This would help Blackstone circumvent FDI restrictions,which are likely to crop up.
UB City is a joint venture between Mallyas UB Holdings and Prestige Developers,in which he has 55% share of the developed space.Some of the big corporate names occupying office spaces in UB City include 3M,Apple,Citibank,Ernst & Young,Toyota,Kawasaki and Yahoo.
At present UB City commands office rental rates of Rs 120 to Rs 130 per sq ft and retail rental rates of about Rs 250 to Rs 300 per sq ft,giving annualized return on rental incomes of about 11-13 %.Last month,Blackstone sunk Rs 1,015 crore for a significant minority stake in Pune Dynasty Projects,a special purpose vehicle (SPV) in which Embassy holds three of its FDI-compliant commercial business parks,in Bangalore.
At the announcement of the deal,Jitendra Virwani,CMD,Embassy Group,had said that the newly formed SPV would be charting out an aggressive road-map to increase its rent-yielding office space portfolio.
REALTY TO RESCUE
UBHL raised around Rs 100-125 crore from HDFC by way of a rental monetization package comprising its office and retail spaces at UB City UBHLs audited fi nancial report for March 31,2012,states that it has borrowed Rs 525 crore against Kingfisher Towers-Residences at UB City
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