In the biggest realty deal in the country this year, DLF Monday announced sale of 17 acres of prime land in Mumbai to Lodha Developers for Rs 2,700 crore, almost four times higher than the price it had paid in 2005.
India’s largest real estate company DLF had bought the land from National Textile Corporation for Rs 703 crore. It decided to sell this piece of land as part of the strategy to exit from non-core business.
In a statement, DLF said that the company has sold the entire stake in its arm Jwala Real Estate, which owns this land at Worli in Mumbai, for “an enterprise value of about Rs 2,700 crore”.
Separately, Lodha Developers said it has entered into an agreement with DLF to acquire the land.
“The acquisition is for a consideration of Rs 1,200 crore for both equity and debentures of the company. In addition, Lodha is also expected to take over about Rs 1,500 crores of liabilities that Jwala has incurred for the development since it purchased the property from NTC in 2005,” Mumbai-based Lodha said.
Although DLF has earned Rs 2,000 crore proft on this deal, the valuation is lower than Indiabulls’ deal in 2010 for the 8.39 acres of NTC land for Rs 1,580 crore.
“The acquisition is 3-4 times cheaper than deals recently done by other real estate players. At a cost of just over Rs 5,000 per sq ft, this land acquisition gives Lodha significant competitive advantage to build a mixed-use development over 5 million sq ft at the prime location of Worli,” Lodha said.
When contacted, DLF Group CFO Ashok Tyagi said: “We have received Rs 500 crore in advance from Lodha. The deal will get completed by October.”
On valuations, Tyagi said: “The size of the deal is fair. We have broadly got what we were looking for” and added that the funds would be used to cut debt that currently stands at Rs 22,680 crore.
DLF aims to cut debt by Rs 5,000 crore this fiscal, he said, adding that talks are on for sale of hotel business Amanresorts and wind energy.
Lodha said real estate players, including Oberoi and Runwal, had also put in their bids to buy this land.
The investment of Rs 2,700 crore would be funded through equity and bank loans, Lodha Developers Managing Director Abhisheck Lodha told PTI.
When asked whether the company would rope in private equity players in the deal, Lodha said “not sure”.
DLF share price rose by 3.47 percent at Rs 217.55 on the BSE in anticipation of announcement of this deal.
With this current deal, DLF has raised nearly Rs 8,000 crore from sale of non-core-assets (hotel plots and IT SEZs/ Parks) in the last couple of years.
This is the biggest land deal since March 2011 when Wave Infra bought 151 acres of land in Noida for a whopping Rs 6,570 crore.
For Lodha’s, this is the second high-value land deal in the recent times. In 2010, the company had bought a 25,000 square metre plot at Wadala in Mumbai for Rs 4,050 crore, termed as the costliest deal in the city.
Among other major land deals in the country, BPTP had bagged 95 acres of land in Noida for Rs 5,006 crore through an auction, but the deal fell through as the company was unable to make the full payment.
DLF had bagged a 350-acre plot for Rs 1,750 crore in Gurgaon in 2009 and acquired 38 acres in the heart of Delhi for Rs 1,675 crore in 2007. Unitech had won 340 acres in Noida for Rs 1,582 crore in 2006.
The deal has been struck at a time when the general real estate market is facing tough times due to economic slowdown and high interest rates, Lodha added.
Commenting on the deal, Lodha Developers Deputy Managing Director Abhinandan Lodha said, “This is a unique transaction where we not just acquired land but an ongoing project with all approvals and with construction well progressed. We think that the acquisition has given us very competitively priced land in the island city.”
When contacted, property consultant Jones Lang LaSalle India Country Head Anuj Puri said it is not correct to say that valuation of deal is lower or cheaper as “there were not many players to be able to write a cheque of half a billion dollars whether in India or globally to buy a real estate”.
“Given this scenario, it’s a great deal for both DLF and Lodha in present market condition,” Puri said.
In 2011-12 fiscal, Lodha achieved Rs 5,000 crore of sales, delivered 3 million sq ft of area and spent over Rs 1,600 crore on construction.
