Unitech eyes more funds from Lehman

Close on the heels of announcing a $175 million (Rs 740 crore) deal with Lehman Brothers Real Estate Partners for its Mumbai project, Unitech, the country's second largest listed realty company, today said it is in talks with Lehman for raising funds for other commercial projects in the country.

The deals are set to be finalised in the next five to six months. Unitech is developing nearly 25 million sq ft of commercial space in cities including Delhi, Gurgaon, Noida and Kolkata and the company could dilute the stake in the specific projects, it said.

The company is also in talks with other private equity players to raise nearly Rs 1,260 crore to fund its mall and hotel projects across the country, according to company sources. It is setting up nearly 26 hotels in the next couple of years and 15 malls with an investment of Rs 20,000 crore.

Lehman has picked up a 50 per cent stake in the 1 million sq ft of space in the project jointly developed by Unitech and its local partner, Western Expressway JV, in Santacruz, in the western suburb of Mumbai. The project involves a total development of 18 million sq ft and is estimated to cost Rs 26,000 crore.

Lehman Brothers Real Estate Partners and the Western Expressway JV will each contribute 50 per cent of the construction cost. For Lehman Brothers Real Estate Partners, with its total corpus of $4 billion, Unitech's Mumbai deal is the largest investment in the Indian property sector.

"Today public equity is not giving fair value for the projects, while private equity is willing to do so. This deal is an indication that enough liquidity is available for quality players. We are also in talks with Lehman for similar deals,'' said Sanjay Chandra, the managing director of Unitech.

Adds Ambar Maheshwari of DTZ, a global investment advisory: "Pricing had gone up a bit.

Therefore, structured deals at reasonable valuations are happening now. Investors are demanding preferred or priority returns from their investment.

Unitech's fund-raising plans follow the deferring of its plans to raise Rs 2,940 crore from the public issue of its real estate investment trust (REIT) on the Singapore Stock Exchange (SGX) and a qualified institutional placement (QIP) of nearly Rs 6,000 crore in the domestic market due to unfavourable stock market conditions. The country's largest listed developer, DLF, has also deferred its plans to raise Rs 8,000 crore through the REIT listing on SGX due to poor market conditions.

Unitech has already made an entry into the country's telecom sector by obtaining Unified Access Services Licences for all the 22 telecom circles across the country and the company has already obtained spectrum for five telecom circles.

The company has nearly 50 million sq ft of land under development, which includes 35 million sq ft of residential, 25 million sq ft of commercial development and the rest comprising malls and hotels. Lehman has already announced a real estate joint venture with realty company Peninsula Land., wherein Lehman is investing in the latter's projects.

Unitech shares gained 5.63 per cent to close at Rs 197.80 in an upbeat Mumbai market on Monday.