Kotak Realty Fund sells prime Mumbai commercial property to Tata Realty

In the largest real estate fund exit in India, Kotak Realty Fund sold one of its prime commercial property assets in western Mumbai to a real estate fund of Tata Realty and Infrastructure for an enterprise value of Rs525 crore.

Kotak Realty Fund, a unit of Kotak Mahindra Bank, was one of India's first private equity funds and has assets worth $850 million under management. The firm's maiden fund, the Kotak India Real Estate Fund – I, made a hefty profit for it within five years, following the sale of Peepul Tree Properties Pvt Ltd, which owns an information technology park in Goregaon. 

The Peepul Tree IT park comprises 700,000 sq ft of leaseable area and counts among its tenants firms such as Accenture, HP, BNP, Tata AIG and Integron. The fund, which made an initial investment of Rs95 crore in the project, has received over Rs400 crore following the exit. 

The fund has also invested in other properties including Lemon Tree Hotels Pvt Ltd – which operates a chain of hotels in a dozen cities, offering 1,000 rooms – Green Boulevard, an IT/ITeS commercial project in Noida, a mixed-use residential project in Chennai and a golf villas project in Bangalore.

''This has been a highly successful investment for the fund,'' remarked V. Hari Krishna, director, Kotak Realty Fund. ''It was a control investment, which we have been able to lease, operate and exit profitably.''

According to S. Sriniwasan, the CEO of the fund, its investment in Peepul Tree Properties and the subsequent exit was a classic example of its approach to real estate investing and fund management. ''By making these investment decisions, we have helped build quality assets in partnership with leading Indian developers and have created enduring value for our investors,'' he adds.

For Tata Realty and Infrastructure Ltd and Tata Realty Initiatives Fund 1, the acquisition is a step forward in implementing its strategy of having a national presence in the commercial and IT space. ''With this strategic investment, we have established our presence in Mumbai with an existing, operational asset,'' remarks Sanjay Ubale, managing director, Tata Realty. ''We are confident that the development is in sync with our overall growth strategy and we expect a significant growth in this business.''

The 100-per cent subsidiary of Tata Sons is focussing on real estate and infrastructure projects, including airports and roads and bridges. It is also setting up a $1 billion offshore fund to finance its initiatives.