In the first real estate bulk deal in the National Capital Region, New Delhi-based realty major Emaar MGF is learnt to be in an advanced stage of selling its under-construction 550-flat residential complex Palm Drive in Gurgaon for Rs 1,000-1,200 crore to New York-based marquee realtor Tishman Speyer.
For the beleaguered Emaar MGF, a joint-venture between Dubai-based Emaar and Shravan Gupta-led MGF Land Ltd, this is a fire sale, as the company is unable to sell the flats by itself owing to the current slump in the housing market and desperately needs money to retire part of its R4,689-crore debt and improve its cash flows.
When contacted, Emaar MGF CFO and executive president Sanjeev Saddy said: ?Talks with Tishman Speyer are in preliminary stages. It?s a good move for us if we realise the optimum value of the flats. But nothing concrete has materialised as yet.? Tishman declined to comment on the development. The American realtor currently manages the iconic Rockefeller Center building in Manhattan. Tishman currently has three properties in India, one in Chennai and two in Hyderabad.
The deal, if it goes through, can provide Emaar MGF some reprieve, as it can look to retire a third of its debt. The 2009 meltdown in the Dubai property market hurt its joint-venture partner Emaar badly.
That, coupled with its still-in-limbo IPO first scuttled by a bad market in February 2008, and subsequently red-flagged by market regulator Sebi twice, last time in September 2010 over irregularities in its offer document and controversies around its development of the Commonwealth Games Village, has put the company in a tight spot. Emaar-MGF was also raided by the Enforcement Directorate in June 2009 over alleged misuse of FDI funds. These investigations are ongoing.
The company was in talks with Tishman to sell a small project for R220 crore in Gurgaon two months back, but has now shelved that plan as it needs more money to improve its cash flow on an immediate basis, people with direct knowledge of the ongoing transaction said.
Meanwhile, there were reports that Mohamed Alabbar-owned Emaar will part ways with Indian partner MGF following the Indian partner?s failed attempts to resurrect the business. However, company officials and promoters have repeatedly denied any such proposal.
Despite its current troubles, Emaar-MGF has managed to scale down its debt from R6,000 crore a year and a half back to R4,689 crore in September 2010. Apart from the current block deal, the company is also trying to sell small land parcels for plotted land development and garner revenues to further scale down debt and finance future projects. The company had a net profit of R126 crore on total income of R2,078 crore in FY10.
At present, FDI guidelines governing real estate entail that a foreign player has to invest at least $5 million in real estate development in India with a lock-in period of three years. For developing a project, the minimum area requirement prescribed by the government is 10 hectares.