Nitesh Estates, Goldman Sachs to invest up to $250 mn in real estate

New Delhi: Investment bank Goldman Sachs Group Inc. and realty firm Nitesh Estates Ltd will jointly invest up to $250 million (around Rs.1,600 crore) in profitable commercial real estate assets in India, the companies said on Thursday, in yet another so-called platform deal between an investor and a developer.

The announcement comes a day after Bengaluru-based developer Nitesh Estates said it has acquired the Park Plaza mall at Koregaon Park in Pune. Goldman Sachs has backed the acquisition with $37 million.

“This landmark investment announcement with Goldman Sachs, an experienced investor in Indian and global real estate, will accelerate our firm’s footprint across the country by providing capital where it is needed as well as through acquisitions of existing projects,” Nitesh Shetty, chairman and managing director of Nitesh Estates, said in a statement. “Like Koregaon Park Plaza, future target real estate investments will be in leased, income-producing A-grade office buildings and luxury commercial and hospitality facilities throughout India’s first-tier cities.”

“We believe the cyclical recovery in India has begun. The new government is focused on boosting potential growth and removing bottlenecks, which will kickstart the investment and consumption cycles leading to enhanced GDP (gross domestic product) growth. This announcement is consistent with our strategy to invest in sectors critical to India’s development,” said Sonjoy Chatterjee, chairman, Goldman Sachs India.

Since 2006, Goldman Sachs has invested across different sectors and deployed more than $2 billion in the country.

Founded in 2004, Nitesh Estates has a predominantly residential portfolio, apart from commercial office, hospitality and retail assets. In addition to its base of Bengaluru, the firm plans to expand its operations in Chennai, Goa, Hyderabad, Pune and the national capital region.

In the past three years, large sovereign wealth funds, pension funds and other global investors have partnered with Indian developers to create investment platforms. It typically starts with a pilot investment, after which the investor makes a larger commitment to jointly make more transactions. “Platform deals offer a win-win situation for both parties. The developer has the financial support of a single investor who can write large cheques and the investor develops a comfort level with the developer, with whom it chooses to deploy more funds rather than scouting for deals themselves,” said Chintan Patel, partner, transactions and restructuring, real estate and hospitality at KPMG India, a consultancy firm.

Last year, Brigade Enterprises Ltd entered into an agreement with Government of Singapore Investment Corp. Pte Ltd (GIC) to create an investment platform to acquire land for residential and mixed-use developments—including shopping malls and offices—in cities in southern India.

In 2012, in the first of such deals, Godrej Properties Ltd and a consortium of global investors led by Dutch pension services provider APG set up an investment and development platform to invest Rs.770 crore in residential projects. Last December, Goldman Sachs bought shares worth Rs.255 crore in Vatika Hotels Pvt. Ltd, a company owned by real estate and hospitality firm Vatika Group.

Earlier in 2014, Embassy Property Developments Pvt. Ltd bought out from its partners, Goldman Sachs and Century Real Estate Holdings Pvt. Ltd, a 6.5-acre project in Bengaluru that will have a Four Seasons hotel and luxury homes. Goldman Sachs, which had invested around Rs.450 crore in the project, exited without much profit.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.