The board of Hotel Leelaventure on March 18 approved the sale of four of five luxury properties owned by the company, prime land holding in Agra, intellectual property rights and management contracts for a sum of Rs 3,950 crore to Canadian firm Brookfield.
The four properties sold to the private equity company are based in Delhi, Chennai, Udaipur and Bengaluru. Its oldest hotel, based in Mumbai, has not been sold as per details of the deal. Hotel Leelaventure also said that this transaction will not lead to any change in the shareholding pattern of the company.
"The total consideration payable to the company for the transaction is Rs 3,950 crore subject to adjustments on account of net working capital plus the transaction cost. The agreed amount will be paid to the lenders of the company in accordance with the terms of the definitive agreements towards repayment of dues owed by the company to its lenders," Hotel Leelaventure said in a statement.
In September. the Nair family-controlled company restructured its debts under the corporate debt restructuring (CDR) mechanism. The hotel company, which is based in Mumbai evaluated various options for a viable restructuring, including sale and of hotels, monetisation of non-core assets, equity infusion and debt refinancing by investors.
The transaction however has not come at a favourable valuation for Leela despite months of negotiations.
Under the stewardship of the late Capt. CP Krishnan Nair, Hotel Leelaventure spent a staggering Rs 3200 crore on building two hotels – Delhi (Rs 2,000 crore) and Chennai (Rs 1,200 crore). Located at the busy Chanakyapuri area, the Leela Delhi was the costliest hotel in India at its time of completion. The Delhi property was formally opened in April 2011 while the Chennai hotel was opened in 2013.
A weak real estate market coupled with impractical investments to make them luxurious disallowed valuations to rise any further, according to market experts. The promoters of the company, the Nair family, had put both the properties as a block deal in 2014 itself but due to their high valuations but there were no takers. Chandeliers made of hand blown glass from Murano, Corinthian pillars of Turkish limestone, Rolls Royce cars to ferry guests and large windows overlooking the Bay of Bengal had diffused buyer interests.
In 2015 the board of Leela cleared the sale of its Goa property, the second oldest property of the company, for Rs 725 crore to a Malaysian firm. Prior to that, in 2011, the company had sold its Kovalam property for Rs 500 crore to Dubai-based NRI Ravi Pillai. In between, the company has sold an IT Park located at Kochi for Rs 280 crore to Carnival Group.
Despite these intermittent transactions, Hotel Leelaventure's debt soared to more than Rs 4,300 crore. JMFARC, which controlled 96 percent of the company’s debt, made the two chief promoters Vivek Nair and Dinesh Nair – sons of Leela Hotel founder CP Krishnan Nair – to forgo salary for two consecutive years.
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