Brookefield to buy Equinox office
Canadian institutional investor Brookfield Asset Management is set to buy Equinox Business Park from the Essar Group for Rs 2,450 crore. Equinox, located just off Mumbai’s premier Bandra Kurla Complex(BKC) commercial district, is a 1.25 million square foot commercial property that was developed by the cash-strapped conglomerate’s realty arm.
The term sheet between the two parties was signed on Friday, said people familiar with the development. A formal announcement is due by January 15.
Brookfield stepped in after talks with southern realtor RMZ Corp fell through late last year. RMZ and Essar had announced the sale in February 2016.
Spokespersons of Essar Group and Brookfield declined to comment on the development.
The Equinox Business Park is a self-contained office complex comprising four towers, along with a commerce centre, club house, food court, cafeteria, banquet hall and parking for over 1,000 cars.
“Equinox has been a forgotten building for the last few years, so there is a big opportunity to refurbish and rent up the place — bring in more retail and F&B options,” said one of the people cited above. “RMZ did not invest in the building as the deal never closed and Essar had other larger headaches across the group. So, despite the strategic location, the complex was languishing.”
Essar, one of the most indebted groups, has been labouring under a debt burden of about Rs 1,22,000 crore and has been looking to sell assets in its quest for viability, having succeeded in raising Rs 77,000 crore in this financial year through divestments.
Corporate tenants are paying around Rs 250 per sq ft in a premier office location like BKC while in mid-town Lower Parel, with its overloaded infrastructure, rentals are touching Rs 140-150 psf, said a real estate consultant aware of the transaction
.“Many would like to pay the same Lower Parel-like rates and take up office space at an address like Equinox which is just five minutes off BKC,” he said. “Once the retail mix and sprucing up gets completed, the complex can easily charge a premium to its current Rs 130-140 per sq ft rentals. I don’t think the discount will be Rs 100 per sq ft post the makeover. Expect midtown rates if not higher.”
In the past few years, Brookfield, the world’s largest asset manager, has been aggressively looking to expand its portfolio in the country, both in the residential and commercial real estate segments in an aggressive catch-up game with Singapore’s sovereign wealth fund GIC and private equity firm Blackstone Group. Last year, it concluded one of the largest commercial real estate deals in recent times by acquiring the office and retail assets of Hiranandani Developers for close to $1billion.
HOUSE OF DEBT
Sales proceeds will go largely towards repaying Rs 1,700 crore to HDFC Bank along with Yes Bank and Edelweiss Capital, said people aware of the matter. Once concluded, this will be another key milestone in the group’s develeraging exercise that has seen group debt come down by Rs 77,000 cr ($11.8 billion) in this financial year alone.
The biggest share of this came from Essar Oil’s sale to a consortium of Rosneft, Trafigura and UCP, making it the biggest ever divestment by an Indian corporate.