Hedge funds trapped in alleged $1.5 bn Ireo fraud to pick Varde as manager

The deal would see Varde take over the management of the firm's investments and develop its real estate projects, people said, asking not to be identified as the negotiations are confidential

Foreign investors who backed an Indian real estate venture and now say they were victims of a $1.5 billion fraud are planning to appoint a new manager for the private equity style operation, the latest development in a more than decade-long saga.
 

Investors like Dinakar Singh’s Axon Capital and Chris Hohn’s Children’s Investment Fund Foundation are negotiating to replace the management of Ireo with private equity firm Varde Partners LP, people with knowledge of the discussions said. The consensual deal would see Varde take over the management of the company’s investments and develop its real estate projects, the people said, asking not to be identified as the negotiations are confidential.

The terms of the existing management’s exit and Varde’s appointment aren’t finalised and there’s no certainty that a deal will be completed, the people said. Representatives for Axon, Children’s Investment Fund Foundation, Varde, and Ireo’s current management declined to comment.

The change would cap a drawn out dispute that was dragged into the spotlight in 2018 when the investors accused Ireo’s bosses of defrauding them, leading to a bitter legal battle. Ireo has denied the allegations. It comes at a time when India is attracting increasing attention from some of the world’s biggest real estate investors including Blackstone Group Inc. and Brookfield Asset Management Inc.

Ireo was founded in 2004 by Indian businessman Lalit Goyal, who remains in charge, together with Anurag Bhargava, the former head of private equity at Michael Dell’s MSD Capital, and former Colony Capital Inc. analyst Louis Klein. Klein, former Goldman Sachs Group Inc. partner Steven Wisch and the company’s ex-Chief Executive Officer Ramesh Sanka have all since left Ireo.

Ireo’s assets include an office and residential development project in India’s National Capital Region around Delhi.