Private equity (PE) investments in real estate in the April-June quarter rose both in volume and value to $318 million, an increase of 85% over $172 million raised by real estate companies from PE investors in the corresponding quarter last year. On a sequential basis, there was a drop from $569 million the companies raised in Jan-March quarter. PE investors invested in 13 companies in the just concluded quarter as against six in the corresponding quarter last year.
PE firms like Blackstone - which has concluded the biggest real estate deal this year (in January-March ) so far by investing $367 million in Embassy Group's Bangalore project - have completely refocused on real estate. "They are more bullish on real estate than traditional sectors and are keen to do more," said Arun Natarajan, CEO of Venture Intelligence, a firm which tracks PE investments .
In June quarter, Ascendas Trust's $110 million acquisition of 2 million sqft of office space in Hyderabad from Phoenix Group was the largest investment . This was followed by Xander's $52 million investment in Supertech's 125 acre township project in Gurgaon and Clearwater Capital's (along with Ajay Piramal Group non-banking financial company PHL Finance ) $50.2 million investment to finance VGN Developers' acquisition of a land parcel for a gated community project in Chennai.
Transactions could gain traction going forward as developers are still waiting for a manna from banks. With bank funding drying up, developers are left with little choice other than knocking on PE doors. "I expect the next six months to be better," Natarjan said.
Companies have learned from the first wave of investments (2006 to 2009) when many of them burned their hands. Today, most of the transactions are debt transactions and don't involve equity. "None of the projects that firms took equity in the first wave were completed on time," said S Sriniwasan, CEO of Kotak Realty Funds.
Most deals have happened in residential space in Tier 1 cities. Driven by better returns, Sriniwasan said that his fund was focusing only on residential properties in large cities .
Although, the opportunity in lower tier cities is considered untapped, no one is immediately investing in it. "The fascination for Tier 2 and 3 has completely gone away," said Natarajan. "It will take some time before firms start looking at it again."
PE firms are also sticking to few partners this time compared to earlier when they tried to engage with multiple developers. Blackstone group for example is engaging most with the Embassy group for its investments.
However, PE-real estate investments in the first six months of 2013 at 21 transactions ($887 million across 20 deals with disclosed values) are still down 16% compared to the 25 investments in the corresponding period in 2012 ($659 million across 22 investments).
PE firms like Blackstone - which has concluded the biggest real estate deal this year (in January-March ) so far by investing $367 million in Embassy Group's Bangalore project - have completely refocused on real estate. "They are more bullish on real estate than traditional sectors and are keen to do more," said Arun Natarajan, CEO of Venture Intelligence, a firm which tracks PE investments .
In June quarter, Ascendas Trust's $110 million acquisition of 2 million sqft of office space in Hyderabad from Phoenix Group was the largest investment . This was followed by Xander's $52 million investment in Supertech's 125 acre township project in Gurgaon and Clearwater Capital's (along with Ajay Piramal Group non-banking financial company PHL Finance ) $50.2 million investment to finance VGN Developers' acquisition of a land parcel for a gated community project in Chennai.
Transactions could gain traction going forward as developers are still waiting for a manna from banks. With bank funding drying up, developers are left with little choice other than knocking on PE doors. "I expect the next six months to be better," Natarjan said.
Companies have learned from the first wave of investments (2006 to 2009) when many of them burned their hands. Today, most of the transactions are debt transactions and don't involve equity. "None of the projects that firms took equity in the first wave were completed on time," said S Sriniwasan, CEO of Kotak Realty Funds.
Most deals have happened in residential space in Tier 1 cities. Driven by better returns, Sriniwasan said that his fund was focusing only on residential properties in large cities .
Although, the opportunity in lower tier cities is considered untapped, no one is immediately investing in it. "The fascination for Tier 2 and 3 has completely gone away," said Natarajan. "It will take some time before firms start looking at it again."
PE firms are also sticking to few partners this time compared to earlier when they tried to engage with multiple developers. Blackstone group for example is engaging most with the Embassy group for its investments.
However, PE-real estate investments in the first six months of 2013 at 21 transactions ($887 million across 20 deals with disclosed values) are still down 16% compared to the 25 investments in the corresponding period in 2012 ($659 million across 22 investments).
http://timesofindia.indiatimes.com/business/india-business/PE-investments-in-real-estate-pick-up-in-April-June-quarter/articleshow/20938369.cms
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