After Rs 8,900-cr stake sale to GIC, DLF might not launch REITs

Firm said with cash-rich partner by its side, it wouldn't need to head for capital mkts anytime soon

The country’s largest real estate developer DLF might have put its plan to launch the country’s first real estate investment trusts (REITs) on the back burner.  
 

In an investor call on Monday — after getting a stamp of approval from the board of directors for the 33.34 per cent stake sale of DLF Cyber City Developers (DCCDL) to an affiliate of Singapore’s sovereign wealth fund GIC for a total of Rs 8,900 crore — the company said that with a cash-rich partner by its side, it would not need to head for the capital markets anytime soon.

DLF was planning to be the first real estate developer to launch REITs and form a special purpose vehicle (SPV). It had even signed non-disclosure agreements with 25 global investors. It had plans to launch REITs worth up to Rs 6,000 crore in two tranches over two years.

While the DLF has got Rs 8,900 crore from GIC for its 33.34 per cent stake in DCCDL, the rest Rs 3,000 crore would come from DCCDL buying stake from promoters K P Singh and family, taking the total stake sale deal value to Rs 11,900 crore.

On being asked if DLF would launch REITs now, the top management said that they were under no such pressure now. “The structure of the deal is almost like that of a private trust, so we do not need to go back to the capital markets. After this partnership with GIC, there is no such pressure,” they said.

The investment would help the company reduce the debt of the residential vertical significantly.

DLF

The company plans to invest in commercial assets in Mumbai and Bengaluru and would be launching projects soon after receiving the funds from the stake sale.

It has also decided to take a differentiated approach to the selling its residential properties in the near future. “Rather than discounting, we would sell those properties that are nearing completion,” the management said during the investor call.

The real estate major had posted a 58 per cent decline in its consolidated net profit at Rs 109.01 crore for the quarter ended June. Industry insiders had attributed the losses to the negligible sale of DLF’s residential properties since March.

DLF had a net debt of nearly Rs 26,000 crore at the end of the June quarter and, out of that, Rs 5,500 crore pertained to its rental arm, DCCDL. A substantial part of the net transaction proceeds into DLF, and the deal, is set to be completed by November after all the regulatory approvals, including that of the Competition Commission of India are clear.