Textile major Alok Industries has exited, for a loss, its five-year-old real estate investment in an office building at the Lower Parel area of this city.
The company has sold 615,000 sq ft of area in Tower B of the Peninsula Business Park building at an average of Rs 16,750 a sq ft or Rs 1,030 crore, said an executive. This is a loss of Rs 25 crore. In 2007, the company bought this property from Peninsula Land for Rs 1,055 crore or Rs 17,154 per sq ft.
The company sold the entire space in two tranches—315,000 sq ft earlier this year and 300,000 sq ft recently, the sources said.
Besides selling one floor to finance services company SICOM, it sold space to several banks and financial institutions in the Peninsula Business Park, the executive said.
“I think the times were wrong. If the times were correct, we would have made better gains from the project,” said a senior executive in the company.
Real estate consultants agree. “When they bought into the project, the price could have been Rs 17,000 a sq ft and they must have expected significant upside. That did not happen. In hindsight, the timing was wrong and the markets tanked,” said Raja Seetharaman, managing director of Aperon Realty, a realty consultant.
According to global property consultant Knight Frank, transaction activity in Mumbai’s commercial office properties fell nearly 23 per cent in the second quarter of the current financial year, compared to the same quarter last year, and by 19 per cent compared to the preceding quarter. Office rents and capital values have declined in Lower Parel by 11 per cent and eight per cent, respectively, in the past year, according to a recent report by BNP Paribas.Two years after it entered the real estate segment, in 2009, Alok said it wanted to exit the real estate business and concentrate on its core textile business.
As the company ventured into the real estate and retail segments aggressively, its debt doubled to nearly Rs 13,000 crore in 2012 from Rs 6,500 crore in 2009. It started selling realty assets, exited from a UK retail venture and loss-making stores of its H&A brand, to reduce debt.
"We have decided to keep selling our projects as they get completed (floor by floor) and bring back the investment into our core business, which can be used to pay our existing debt, as well as to Peninsula." Sunil Khandelwal, chief financial officer, Alok Industries, told Business Standard in 2009.
Alok has also sold 60,000 sq ft of space in the nearby office project, Ashford Centre in Lower Parel, for Rs 129 crore or Rs 21,500 a sq ft, to various financial institutions, the compay executive said..“If you look at the sale of both our investments in Peninsula and Ashford, we have made Rs 1,200 crore,” he added.
The company made profits of Rs 700 crore by selling apartments in its projects at the Nahur and Breach Candy areas of Mumbai, he said.