PEs get picky

Where’s the money flowing PE players are investing in projects rather than in the promoter companies. PE player: Lehman Brothers Real Estate Project: Unitech’s 100-acre commercial complex on Western Express Highway, Mumbai Amount invested: $175 million PE player: Yatra Capital and Saffron India Real Estate Fund Project: Parsvnath’s redevelopment of BEST Bus Depot, Kurla, Mumbai Amount invested: Rs 186 crore PE player: Merrill Lynch Project: DLF’s middle-income residential projects in Chennai, Bangalore, Kochi and Indore Amount invested: Rs 1,481 crore

The skies, says Brett White, President and CEO, CB Richard Ellis, are still clouded and the forecast, for capital investments in the commercial realty sector in India, remain gloomy. “Most PE funds in the US have adopted a wait-and-watch policy for their India investments,” he says.

The good news is that the demand-supply ratios are very positive for commercial real estate. “But increasingly, PE players are looking to invest at the project level through SPVs rather than at the enterprise level, as growth options are limited in the latter option,” says Sandeep Singh, Director, Capital Markets Group, Cushman & Wakefield.

Also, PE companies are including “parachute” clauses. “That means such deals are structured to allow the investor a safety option. If the project goes kaput, it’s the investor who will be bailed out first rather than the promoter,” says Singh.

—Tejeesh N.S. Behl