The whole idea is that when a churn happens, it should be beneficial for the company as it can become zero debt and cash-rich and use the money to create new assets.
Irfan Razack, Chairman and Managing Director of Prestige Group,
Bengaluru-based Prestige Group, which is in advanced stages of talks with Blackstone to sell its various commercial assets for more than Rs 12,000 crore, believes in monetising an opportunity to replace older offices with newer and better ones in anticipation of demand picking up in coming years on the back of digital and IT-ITeS sectors. Without disclosing the contours of the deal, Irfan Razack, chairman and managing director of Prestige Group, told Rishi Ranjan Kala that the sale could materialise in a week.Edited excerpts:
Q. What has been Prestige’s experience with Covid-19?
It’s reality, but we also have to go on with life. The main thing is to keep the team motivated as we have a responsibility towards customers. We adopted innovative methods like virtual launches and others which worked. In April, our sales were down. But after we opened up, June to August and even in September, the sales have done well.
Q. How are construction timelines looking?
We did lose about 3-4 months due to the nationwide lockdown. But today, I am happy to say that 100% of labour is back on all our sites, especially with the large contractors. I do not think we would go to our customers for an extension. Even if there is time overrun, it would be for a couple of months. Another good part is that even our customers are paying on time.
Q. What is the rationale behind selling rental assets to Blackstone?
We are in the business of building and selling and we are also in the business of building, keeping and renting. When REITs came, there was an opportunity for us to do that, but we are not fixed in our mind over it. We are not possessive about assets.
The whole idea is that when a churn happens, it should be beneficial for the company as it can become zero debt and cash-rich and use the money to create new assets. So we keep exploring. If the deal happens (with Blackstone), which hopefully could happen in the next week or so, we can talk about it. I can’t say much at present as we have our limitations. Our larger vision is to replace older assets with newer and better ones. As long as that asset is giving you some upside, you move on from one to the other. After all, we are not shutting shop. We still believe in office space, retail malls and residential. It was a question that at some point in time you have an opportunity, monetise it and move on.
Q. What changes do you see in the customer’s purchasing decisions?
Large residential properties are selling as people now want large spaces. For instance, Prestige Golfshire, which is outside Bangalore has large open spaces and mansions. Not everybody can afford it, but people with wherewithal are coming now as they realise its value. Then, NRIs are buying too. Also, there was this section of people, who thought why do I buy a house when I can rent it. Now this section is also coming forward. Ready properties are selling faster than under-construction ones.
Q. Do you anticipate consolidation in the sector? Also, does it benefit large, listed players?
Many unlisted players also are doing a good job. Any player who did a proper professional job and created a brand and a good reputation will survive. Making a quick buck won’t happen. Consolidation was imminent due to RERA and it brought in that much discipline that people who did not create a brand, were not professional got themselves into trouble and now they are running to established players. What we need not do is put in more supply and deliver projects on time.
Q. Do you feel real estate needs some course correction?
We need to balance our needs with our greed. So you can say that this is my capacity and this is the off-take, and let me not throw more supply in the market. Another course correction does not over-leverage yourself. The bane of this industry is that many developers have their balance sheets overstretched, they cannot service loans, let alone pay them.
Q. What do you anticipate for the sector in the next 6-12 months?
We have to see how the economy behaves. Retail is slowly picking up and the pain should ease in 6-9 months. But hospitality would be the last, maybe 12-18 months to come back. There is talk about work from home (WFH), but it is not a practical thing. Right now all companies, especially IT companies are paying rents and their employees are working from home. Maybe we will have a hybrid model of some employees WFH and some working from the office. For office space in the future, a lot of business in IT-ITeS services will come. I believe for a new take-up, it will require another 6 months after which demand will come. Fortunately, in large metros, there was not that type of vacancy and the new stock that is coming up will come after one or two years.