Bengaluru realtor Brigade in talks for strategic investment in hospitality

While Brigade plans to ramp up the number of operating keys in its hospitality business from 1,350 to 2,000 in 24-30 months, it is also looking to add keys beyond 2,000 in the longer run

In a bid to expand its presence in the hospitality sector, Bengaluru-based developer Brigade Enterprises Ltd is in talks with potential investors for a strategic investment, its chairman and managing director M R Jaishankar said on Wednesday.

"We have a strategic investment by Singapore government company GIC in the Brigade Group and are now looking at a strategic investment in the hospitality sector to take care of our future growth. Talks have been on for some time but are not fully concluded," said Jaishankar. The company's new hotel, launched in Gujarat International Finance Tec-City (GIFT City), will be managed by French hospitality player Accor under the brand 'Grand Mercure'.

While Brigade plans to ramp up the number of operating keys across its hospitality portfolio from 1,350 to 2,000 in the next 24-30 months, it is also looking to boost future growth as it looks to add keys beyond 2,000.

The 151-key Grand Mercure has been built at a project cost of Rs 150 crore, with the players expecting an initial occupancy of 35-40 per cent, which is likely to go up in near future. The Brigade Group has already signed deals with Accor for more hotel properties in Bengaluru and Mysuru in the near future. Overall, the company has had average occupancy rates of 70-75 per cent across its properties.

Plans are also afoot for residential, commercial, retail and hospitality projects of around 44 million square feet (msf), of which 19 msf is already under construction, including 10 msf in residential, eight msf in office space, and the remaining in retail and hospitality. Jaishankar said that the group's capex plans run into Rs 2,500-3,000 crore a year.

With projects lined up in other segments, Brigade's ratio of residential to non-residential has already moved from 75:25 to 55:45. "If all goes well, we will maintain this at about 50:50," Jaishankar said.

Exuding confidence, Jaishankar reiterated the group's previously-announced growth guidance for FY20. "The intent is to maintain 25-30 per cent growth in FY21. We have the projects at advanced stages, based on which, we are confident of 25-30 per cent growth," he added.

Jaishankar stated that the slowdown in real estate was cyclical. "We believe the government is working on it. Responses have to be faster. Real estate is a 10-year business cycle," he said.

With most of its growth being funded through a combination of securitised lease rentals, internal accruals and institutional funding, the group is bullish on its debt-equity ratio. "Our debt:equity is 1:1, and 75 per cent of the debt is securitised either by lease income or what we call gross operating income of the hospitality sector. Our residential exposure is only 20-22 per cent of our overall debt. We had a QIP in 2018, so we don’t see another happening immediately. We will try to maintain debt levels," Jaishankar added.