Milestone plans to raise funds for warehousing

Also aims to set up NBFC; targets $1 billion in assets in the next few years

Milestone Capital Advisors, which specialises in real estate private equity (PE), plans to introduce new funds that will invest in commercial and warehousing spaces. It also plans to set up a non-banking financial company (NBFC).

Rubi Arya, executive vice-chairman of the company, said: “After demonstrating healthy exits from all our funds, we are now evaluating new funds in the commercial and warehousing space. We also plan to start NBFC business. We have already begun operations in our trusteeship business, which has garnered assets under trusteeship around Rs 9,000 crore.”

Last month, Milestone exited from 247 IT Park, generating 2x multiple on exit, making it one of the largest exits in the commercial real estate PE space. Situated at Vikhroli in Mumbai and spread over 1.1 million sq ft, the deal was closed at an enterprise value of Rs 1,060 crore. Milestone had invested Rs 260 crore and exited with 2.4 times return. Comparatively, this exit is significant because recently, one large real estate property fund sold its stake in one of its investments at a loss.

The Indian commercial real estate markets have been witnessing sluggish growth rates in the past few years primarily due to political and macro-economic uncertainties. However, in 2014, Milestone exited from eight investments with a total amount of Rs 887 crore. In 2015, it has so far exited from four investments at Rs 670 crore, making total 12 exits at Rs 1,557 crore in 18 months, perhaps the largest in real estate PE segment. After 2011, till December 2013, Milestone had made exits to the tune of around Rs 1,200 crore. Out of these exits, three funds were also giving rental returns, while the rest were development funds.

Arya said: “All exits were at 1.3x to 2.4x multiples. These successful exits are paving the way towards shaping ‘Milestone 2.0’, taking forward our aspirations towards managing a $1-billion investment portfolio within the next few years.” The company currently manages an undivested portfolio of Rs 1,300 crore.

Arya took over the reins of the company after its founder and her husband Ved Prakash Arya passed away in 2011 in a freak accident. Milestone is the only fund house in the Indian real estate PE sector to be headed by a woman.

Explaining her strategy to generate returns in the real estate segment, she said: “We prefer commercial properties and will remain focused on Tier-1 cities as they produce higher quality assets with higher standards of maintenance. For the next few years, private equity investors will rely on structured debt over pure equity. Investors are happy with a more realistic 18-20 per cent internal rate of return than angling for higher returns promised by equity. At the same time, it mitigates the risks in execution and selling to a great extent.”

This strategy has worked well so far and augmented Milestone’s growth over the past many years. PE fund houses usually go for project-specific funding and the average fund tenure is between five and seven years. Milestone is currently raising its 10 th  fund, a Rs 500-crore short tenure structured debt product.