Madhurima Nandy writes about the pending delay in GoldmanSachs' Bangalore property here.
Close to a year after Goldman Sachs Group Inc. invited bids for its 6.5 acre under-construction project in Bangalore, where a Four Seasons hotel and residences were planned, the transaction is still mired in uncertainty.
Goldman Sachs, the 75% majority shareholder in the property, accepted a bid by real estate firm RMZ Corp. to buy the project towards the end of 2013.
But that deal came to a standstill when its Bangalore-based partner Century Real Estate Holdings Pvt. Ltd, which holds the remaining 25%, brought inEmbassy Property Developments Pvt. Ltd three months back, said people familiar with the development.
The deal, for which Embassy Property has now emerged as the frontrunner, is far from closure as Goldman Sachs and Century Real Estate remain at odds on the buyer and sale proceeds, the people said on condition of anonymity.
With close to Rs.300 crore of bank liabilities on the asset, creditors—a consortium of banks led by State Bank of India (SBI) that also includes Axis Bank Ltd—have set a 30 April deadline for the partners to make the required interest payments, failing which the loan would turn bad.
Last week, Century Real Estate infused Rs.6 crore into the asset towards an outstanding interest payment, which will bring temporary relief and keep the account running, said one of the people cited above. “The remaining payment will be made shortly,” he said.
It remains to be seen if the lenders are satisfied with the partial payment or will opt for auctioning the property.
SBI declined to comment on individual accounts. Axis Bank didn’t respond to queries.
“The deal will be closed in two months’ time,” said Jitendra Virwani, chairman, Embassy Property.
Embassy plans to pay the liabilities along with Rs.330 crore to secure the asset in its entirety. The Bangalore-based developer is closing a large transaction to buy Vrindavan Tech Village, a 106-acre special economic zone in Bangalore.
The City View project in Bangalore’s Yeshwanthpur area is a joint venture involving Goldman Sachs and Century Real Estate, the land owner. Construction at the site began in 2010. So far, around Rs.600 crore has been invested in the property in addition to some long-term debt.
While RMZ, a leading developer in office space development in Bangalore, continues to hold on to its offer, as confirmed by a company executive, the situation has left Goldman Sachs baffled.
“Though there is a genuine bid on the table from RMZ, which has also put in the money, the deal is being held up. In the last three months, there has been no other formal bid to counter the one from RMZ, where, in fact, the deal could have been closed long back,” said another person involved in the matter.
The deal will take a long time to conclude owing to the number of differences that have cropped up along with way, analysts say.
Many real estate transactions are taking longer than usual to conclude owing to a number of reasons ranging from seller-buyer disagreements to valuation differences and a slow-moving property market.
“Hospitality is a tricky asset class, different from other real estate assets, with the former throwing up operational demands,” said Rajeev Bairathi, executive director of the capital transaction group at property advisory Knight Frank India. “Several developers and investors who committed to building hotels are in the process to exit, and there are many such opportunities across cities today.”
