Piramal Realty frontrunner to buy HUL's Gulita

After a prolonged process, the Ajay Piramal-promoted Piramal Realty has emerged as a frontrunner to buy Hindustan Unilever’s sea-facing property, ‘Gulita’, according to two sources.

By quoting Rs 410 crore for the one-acre property, it has outbid the other two finalists in the fray. The two other entities, led by Anil Ambani and Gautam Adani, are believed to have quoted between Rs 350 crore and Rs 400 crore, said a person with knowledge of sale talks.

Ajay Piramal plans to develop the property and use a part for himself, said another person close to the development. "Although Piramal's bid is a little higher, the company must have agreed to all conditions of HUL," he said. Gulita, the former training centre of HUL, is on a perpetual lease from the Brihanmumbai Municipal Corporation. HUL was planning to sub-lease the property, after the Supreme Court set aside the BMC’s move to charge a 50 per cent premium for transfer of ownership. It then decided to go for an outright sale.

"HUL and the buyer have to meet terms and conditions attached to the plot before it is sold," said a property consultant.

When asked, a spokesperson for the Ajay Piramal group said they did not want to comment on market speculation. An HUL spokesperson said: “We are still in the process of evaluating various options to create value from our property.”

According to a managing director of a property consultancy, the deal has happened at "lower valuations due to tight liquidity conditions in the market, clarity on development rules and costs attached to the development".

Given the floor space index (FSI, total developable area on a given land-lot) of 1.33 and the premium the developer has to pay for additional spaces, the quoted price comes to Rs 45,555 per sq ft. In October 2011, another property developer, Peninsula Land, bought the Bishopgate property owned by Standard Chartered and HSBC in the Breach Candy area, not far from the Worli location of Gulita, for Rs 272 crore. It had paid Rs 90,000 sq ft for the plot, which had development potential of 30,000 sq ft.

Though HUL shortlisted five bidders — Piramal Realty, the other two entities mentioned earlier, Oberoi Realty and Peninsula Land. The latter two companies had issues with valuation of the property and did not proceed further, said sources. Initially, around 10 parties had put in the bids, but half of them showed reluctance over the pricing.

According to property consultants, the Ajay Piramal group is emerging as an aggressive real estate player in the Mumbai market after it sold the domestic formulation business of its pharma arm, Piramal Healthcare, to US-based drug maker Abbott for $3.7 billion, close to two years earlier. In April 2011, the group bought a seven-acre lot from Mafatlal Industries for Rs 750 crore, outbidding other local realty majors. According to sources, the group is in talks with owners of a South Mumbai studio to develop it.

Recently, Piramal Healthcare and its non-banking finance arm put Rs 110 crore into realty developer Rustomjee, by subscribing to its debentures.

“Piramal Realty has been the front-runner for prime South Mumbai assets for strategic reasons and why not? Isn’t this the best time to buy? The clarity on development control has further simplified acquisitions in terms of potential of land and, therefore, valuations,” said Sanjay Dutt, chief executive, Jones Lang LaSalle, a global property consultant.

Gulita, constructed in 1986, was was put on the block after HUL moved its training centre to a sprawling campus in Andheri here last year. HUL has also been trying for close to two years to sell its erstwhile headquarters in South Mumbai. In January this year, the company came out with advertisements in newspapers, giving lessees in the building the option of buying it after three years.