Ownership of the Equinox Business Park is about to change hands soon. The party buying this commercial property is the Canadian institutional investor Brookfield Asset Management that will be paying the owner Essar Group Rs 2,450 cr for the property.
Equinox Business Park is located just off Mumbai’s premier Bandra Kurla Complex(BKC) commercial district and is a 1.25 mln sqft commercial property that was developed by the cash-strapped conglomerate’s realty arm. The term sheet between the two parties was signed on Friday and a formal announcement about the same is expected by January 15.
Brookfield stepped in after talks with southern realtor RMZ Corp fell through late last year. RMZ and Essar had announced the sale in February 2016.
The Equinox Business Park is a self-contained office complex comprising four towers, along with a commerce centre, club house, food court, cafeteria, banquet hall and parking for over 1,000 cars. As of now, just about 40% of the park is currently leased.
Essar, one of the most indebted groups, has been labouring under a debt burden of about Rs 1,22,000 cr and has been looking to sell assets in its quest for viability, having succeeded in raising Rs 77,000 cr in this financial year through divestments.
Corporate tenants are paying around Rs 250 per sqft in a premier office location like BKC while in mid-town Lower Parel, with its overloaded infrastructure, rentals are touching Rs 140-150 per sqft, said a real estate consultant aware of the transaction.
“Many would like to pay the same Lower Parel-like rates and take up office space at an address like Equinox which is just five minutes off BKC,” he said. “Once the retail mix and sprucing up gets completed, the complex can easily charge a premium to its current Rs 130-140 per sqft rentals. I don’t think the discount will be Rs 100 per sqft post the makeover. Expect midtown rates if not higher.”
In the past few years, Brookfield, the world’s largest asset manager, has been aggressively looking to expand its portfolio in the country, both in the residential and commercial real estate segments in an aggressive catch-up game with Singapore’s sovereign wealth fund GIC and private equity firm Blackstone Group. Last year, it concluded one of the largest commercial real estate deals in recent times by acquiring the office and retail assets of Hiranandani Developers for close to $1billion.
It is expected that a major share of the sales proceeds will go towards repayment of Rs 1,700 cr to HDFC Bank along with Yes Bank and Edelweiss Capital. Once concluded, this will be another key milestone in the group’s develeraging exercise that has seen group debt come down by Rs 77,000 cr ($11.8 billion) in this financial year alone.
The biggest share of this came from Essar Oil’s sale to a consortium of Rosneft, Trafigura and UCP, making it the biggest ever divestment by an Indian corporate.
In November, Essar concluded the sale of its BPO arm Aegis to Capital Square Partners for Rs 2,000 cr.