Exora buy to help attain rental income target: Prestige Est

Prestige Estates has bought back private equity firm Red Fort India's 62.5 percent stake in Exora Business Park. Exora's annual rental income is around Rs 135 crore, while the enterprise value is Rs 1,400 crore, says Irfan Razack, Chairman and Managing Director of the company. This is one of the largest deals in commercial real estate space.Speaking to CNBC-TV18, Razack says the funding for acquisition was done through internal accruals. Furthermore, this move will enable the company achieve its rental guidance of Rs 450-500 crores in FY16, Razack adds. The deal is likely to be completed by June 30 next year. On future outlook, he says construction of malls and commercial properties will add to the company's rental portfolio, which may go upto Rs 800-850 crore.Below is the verbatim transcript of Irfan Razack\\'s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Nigel: Could you give us few details. How much have you paid for this particular stake, what is the debt that you will be taking on to your books as well?A: We have bought the stake. We get 2.13 million square feet in the special purpose vehicle (SPV) which is currently yielding about Rs 135 crore. The overall enterprise value is valued around Rs 1,400 crore plus but the actual payout is around Rs 600 crore and this is a combination of two deals because also there is a sub-SPV in this which has some residential property, which is ready and once it is sold off, it will pay back almost immediately and the funding has been largely through internal accruals and we have recently taken some non-convertible debentures (NCDs) and this has helped us to buy this asset.Reema: The 600 crore of payout that you have done is what portion of it would be attributed to debt and therefore what would be the total debt on the books?A: Recently we had done NCD. Therefore, from our internal accruals we got cash flows and a combination of this debt and both put together we have managed to pay this amount. This has helped us to buy the stake and it is going to add more value to the overall company's asset base and in the long-term it leaves us lot of opportunities because since the SPV is owned by us fully. Reema: No fresh increase in your debt and if you could give us the number. What is the debt currently?A: I will not be able to give you the debt number offhand but the consolidated debt would be around what it was in the last quarter and if there has been some fresh infusion, it will be for some general growth in the business and some land that we would have done. Nigel: What is the debt increase? From this particular deal there will be no increase in debt because of this deal?A: It could be. It is a combination. You cannot attribute it directly to that but overall there should be some but even if there is some increase in debt, what happens is it becomes a self-liquidating debt because we do have debt in the SPV itself which we have taken over and that is a lease rental discount and the rent goes to pay off the debt.Nigel: You were also talking about some residential property that you will get. You will look to dispose off. What is the value of that particular residential property?A: We have stock worth selling price around Rs 350 crore approximately and once it is sold off - that will also bring in a lot of cash and since it is a ready asset, since the property has just got ready and there is an opportunity for us to sell off the units and it will give us additional cash flow and also bring in fresh cash flow into the company.Reema: This is like residential receivables of Exora Business Park, right. Which you will be able to cash in?A: It is not receivables. It is a ready property which is to be sold. It is a villa development and that once sold will give us that much more cash and infusion will come into the company.Reema: With Exora now in your books, will you be able to achieve your rental guidance of Rs 450-500 crore for FY16 and in numbers, if you can tell us what the growth in the rental yield is, currently at Rs 135 crore for this year but what should be the rough growth in this property on year-on-year basis?A: This will enable us to achieve our guidance that we have given on the rental guidance and whatever our targets were in terms of reaching for the guidance for rent has arrived. If you ask me what will be the future growth of rental in the company. I think we are looking at -- right now we are constructing a couple of malls which will get ready next year and in the pipeline there is quite a large number of commercial properties which is on the drawing board and some have already started construction, so all this will definitely add up to phenomenal growth on the rental portfolio and it could go from Rs 800-850 crore in the next three years - that is if we do not buy any ready property.Nigel: Just to understand - currently you have around 32 percent stake in this particular venture, so were you accounting for Rs 42 crore out of the Rs 135 crore and now that will go up to around 99 percent?A: We are just accounting for the stake that we had. Now since we bought the overall stake, we have to account for the whole thing. I believe it is an opportunity to do a lot of things. It is still on the cards. Let\\'s see what happens in the Budget because now we have two SPVs which we own fully and that will give us that much more flexibility to do whatever we want independently. Reema: You have done four acquisitions of rental assets since FY13, any more on the anvil?A: Not at the moment. Whatever acquisitions we have done, mostly some of the properties which we only had developed, so in a way since we know the location, the title everything else makes it much more easier for us to handle it and we are more in control of the property rather than acquiring someone else\\'s property, but if an opportunity does present itself and we feel the asset is worth it and is coming at decent number and if we have the financial cash flows, I think we will definitely have an open mind to look at more but right now concentration will be to construct more which is on the cards, on paper and some work already happening on ground. So a combination of that will lead to the numbers that I talked about.