SUN Apollo takes 15% stake in Keystone

SUN Apollo Ventures, a joint venture company between the Delhi-based Khemka family and the US-based AREA Property Partners (formerly Apollo group), has picked up a 15 per cent stake in Mumbai-based developer Keystone Realtors for Rs 300 crore, making it the first private equity deal in the cash-strapped real estate space in 2009.

The deal values Keystone at around Rs 2,000 crore. SUN-Apollo India Real Estate Fund, the $630-million offshore fund of Sun Apollo, will invest in existing foreign direct investment (FDI)-compliant projects of Keystone, also known as Rustomjee group, and future projects of the developer, a top Keystone official said.

In January, the Foreign Investment Promotion Board (FIPB) had cleared the Keystone proposal for the offshore investment.
 

PE flows into real estate
Year	2007	2008
Investments ($ bn)	8.7	3.4
Average deal size ($ mn)	55	39
Analyst estimates; 2009 estimates not available

The deal assumes significance as private equity deals have totally dried up in the real estate space in the last six months after property prices crashed across the country due to a slump in realty sales. Residential prices have corrected 25-30 per cent in major cities of the country from their peak last year.

The last deal in the real estate space took place in December 2008 when IL&FS Realty Fund picked up a 15 per cent stake in Infrastructure Ventures India, a special purpose vehicle (SPV) floated by Mumbai-based developer Akruti City, for Rs 200 crore.

“Private equity investments have come to a halt now and those who have funds are looking at distressed assets to buy. But the market is not as distressed as some believe it to be. Still, demand continues to be a challenge and, unless that issue is sorted out, we will see little activity in this space,” said Ambar Maheshwari, director of investment advisory at DTZ, a property consultancy.

Keystone is posting revenues of Rs 200 crore every year and plans to register a sales growth of 100 per cent every year, said Boman Irani, chairman of Keystone Realtors.

“We plan to complete 50-60 per cent of our projects in the next one year and go for joint development and opportunistic investments in real estate,” said Irani.

Keystone has 250 million square feet of land under development in Mumbai and its suburbs, most of which is in the residential segment.