Churn begins at realty, infra funds, as deal flow improves

Property and infrastructure funds are increasingly seeing a change of guard as deal flow improves in the two sectors after 18 months.

On July 12, Starwood Capital Group, one of the largest PE investors in real estate, said it had appointed Sundaram V Rajagopal as managing director, India and Southeast Asia, Starwood India Advisors Pvt Ltd, in place of Balaji Rao, who quit to pursue other interests.

Prior to this, Rajagopal was managing director and country head for Lehman Brothers' Real Estate Partners' activities in India.

A couple of months earlier, Tishman Speyer, the US-based investor and developer, whose portfolio includes Rockefeller Centre in New York, hired Avnish Singh, the former head of the India unit at GE Capital Real Estate. He joined Tishman Speyer as managing director spearheading acquisitions for India.

“I think round one of investments have taken place. People have learnt their lessons. Now they are choosing their partners and strategies to do the next round of investments,” said Rao.

A number of international realty funds either exited the country or became inactive after the global economic slowdown started in late 2008. Bank of America Merrill Lynch is close to selling its $2-billion Asia real estate assets to global PE major Blackstone. Another global investor, Morgan Stanley, is said to be scaling back its realty investments.

“Many global funds which invested in 2006-08 burnt their fingers in Indian real estate. Developers have not delivered on their promises,” said a director at an investment banking firm.

RECOVERY, EXPANSION
But global property funds are getting aggressive again, with faster recovery in Indian markets and the property sector fuelling churning in the top ranks, say PE experts.

According to Amit Goenka, national director, capital markets, Knight Frank India, around Rs 4,000 crore of PE funds and Rs 10,000-12,000 crore of private debt are set to flow into real estate this year.

Apart from international funds, over Rs 7,000 crore of rupee funds are set to be raised by fund managers such as ICICI Venture, Indiareit, Aditya Birla among others.

“Funds are getting active now and movement is happening in firms where funds have to be deployed and teams are in place,” says Ramesh Jogani, managing director of Indiareit, a realty fund manager of the Ajay Piramal group.

Even the infrastructure space, which has seen quite a few big-ticket deals recently, saw shake-ups in top positions. While PE major Olympus Capital invested Rs 1,350 crore in two coal mines of Tata Power, another PE firm, Actis, has tied up with Tata Group to bid for $2 billion worth of road projects. Actis is also set to invest Rs 1,000 crore in the power business of the GVK group.

Mahesh Chhabria, a partner at British PE major 3i’s Indian arm, has quit the firm to join Actis. Infrastructure Development Finance Company Ltd roped in Chetan Dave, founding managing director and chief executive of Sun Apollo Real Estate Advisors, as president and head of its realty investment arm.