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Altico invests Rs450 crore in south Mumbai project
Altico Capital India Pvt. Ltd, the non-banking financial company (NBFC) of Asia-focused investor Clearwater Capital Partners LLC, has provided Rs.450 crore of debt financing to an upcoming residential project in Mazgaon, south Mumbai, company executives said.
The deal is structured in the form of non-convertible debentures (NCD) with a four-year tenor, where the money will be disbursed in tranches.
The project, which is a joint venture of Radius Developers and Sumer Group and is yet to be launched, will develop five 65-storey residential towers, totalling 3 million sq. ft of saleable area.
The finance will be used to acquire the project from the land owner, settle tenants on the land and to start project construction.
“This was an exciting opportunity to back one of the most promising real estate entrepreneurs in Mumbai early in his new corporate evolution and on an attractive residential project that has gone through most of the difficult approvals needed to launch,” said Karthik Athreya, managing director of Altico Capital.
Sanjay Chhabria, managing director of Radius Developers, said the property is at a great location in south Mumbai and is ideal for residential development. “We plan to launch the project early next year,” he said.
Real estate funding in the past three years or so has largely been in the form of structured debt financing, with both private equity (PE) funds and NBFCs aggressively lending to developers, giving the latter a much-needed source of capital when project cash flows have dried up due to weak home sales.
Earlier this year, Altico Capital had raised more than $300 million of equity, mainly for real estate-backed lending. It has invested more than $250 million in the past two years and plans to double its investment pace in the coming year.
Its key investment focus continues to be residential projects in the top five cities—Mumbai, Pune, Bengaluru, Chennai and the National Capital Region, out of which the bulk of the investments will happen in Mumbai.
“Our business is built around the significant existing opportunity to meet the capital needs of capable developers, who are in their growth stage with multiple projects that can enable their own growth apart from being able to repay our debt at attractive IRRs (internal rate of returns) of over 18%. In return, Altico provides early-stage financing to them to unlock value from their land and assets,” Athreya said.
Structured debt transactions seem to be getting larger in real estate, sometimes with PE funds and NBFCs collaborating to do bigger-sized deals to meet developers’ demand for capital.
Recently, Altico Capital and Piramal Fund Management Pvt. Ltd co-invested about Rs.600 crore, in equal measure, across multiple projects of realty firm Century Real Estate Holdings Pvt. Ltd in Bengaluru, in one of the largest structured debt transactions.
In another transaction, the IIFL Group and some of its wealthy clients invested Rs.300 crore in Radius Developers’ slum redevelopment project in the Mumbai suburb of Borivali.
“Debt deals in real estate are a mixed bag, with a number of smaller deals in the Rs.50-75 crore (bracket), where funds reduce their risk by doing more deals,” said Chintan Patel, partner, transactions and restructuring, real estate and hospitality, at KPMG India, a consulting firm.
“However, we are also seeing a number of relatively larger transactions, where a fund decides to do large, single-ticket investments, that also makes asset management easier for the investor,” Patel added.