Indiabulls to exit realty biz, merge with entity led by Embassy, Blackstone

In the past two years, IBREL has sold commercial assets to Blackstone for around Rs 12,250 crore

As part of its move to exit the realty sector, Indiabulls Group will merge over dozen remaining assets of Indiabulls Real Estate (IBREL) with a new entity that will be led by Embassy Group and Blackstone in an all-stock deal.

On Friday, IBREL board approved a proposal to merge 12-13 ongoing, completed and planned residential and commercial projects, each being held by it as well as the Embassy Group, into a new entity yet to be named, IBREL sources told PTI.

On completion of the merger, the Embassy Group will hold controlling stake in the merged entity, while the American private equity (PE) major Blackstone will be the second largest shareholder along with REITs (Real Estate Investment Trust) unit holders, and Indiabulls Group Chairman Sameer Gehlaut will hold a minority stake, the sources said.

The value of the 12-13 properties being merged into the new entity is around Rs 12,000 crore, the sources added.

Indiabulls' bid to exit the realty space got a momentum last April after it entered into an agreement to takeover Laxmi Vilas Bank, but the Reserve Bank refused the deal citing the group's exposure to the realty sector.

In the past two years, IBREL has sold commercial assets to Blackstone for around Rs 12,250 crore.

It can be noted that late last December, Indiabulls Real Estate had sold its properties in Mumbai and Gurugram to Blackstone for an enterprise value of over Rs 810 crore.

The Mumbai-based developer had said the deal with Blackstone included stake in Mariana Infrastructure (which owns a commercial project in Gurugram) and commercial assets/development in Mumbai, which is valued at Rs 675 crore.

IBREL has been selling its completed as well as ongoing commercial assets to Blackstone to reduce its debt, which at March 2019 stood at Rs 4,590 crore.

Last June, it had sold 14 percent stake through open market transactions to Embassy Group for Rs 950 crore as part of its strategy to focus on financial services and exit the realty business.

Under the new merger proposal with Embassy Group, Embassy Property Developments will also invest around USD 200 million (about Rs 1,400 crore) before the merger into the new entity for which it is in discussions with Blackstone and other entities as the entities associated with the PE major part-own/control the Embassy assets being merged.

The fresh investment will be treated as Blackstone's contribution to these assets as part of the merger,the statement said.

The USD 200-million equity investment will bring significant cash into the merged entity and will be used for expanding its business operations, IBREL said in a statement.

The merged entity will be the development arm for both commercial as well as residential assets for the combined group, the statement added.

Under the proposed merger, certain ongoing, completed and planned residential and commercial projects of Embassy will get merged and stand transferred to IBREL.

Some of the Embassy assets are presently owned by entities managed and controlled by it jointly with Blackstone, for which it is in discussions with Blackstone to contribute such assets as part of the merger transaction.

Under the merger, IBREL will issue its equity shares with a face value of Rs 2 each to the Embassy shareholders, in accordance with the swap ratio that will be finalized later.

To speed up the merger process, IBREL has constituted a committee to evaluate and implement the merger, which it plans to complete over the next four weeks.

Indiabulls Real Estate has delivered over 24 million sqft of commercial and residential projects so far and has sold some commercial assets to Blackstone for around Rs 12,250 crore in the last two years.

It has projects that are near completed/under-development worth 32.7 million sqft, which a realizable value of around Rs 22,750 crore and net surplus of over Rs 11,000 crore. The company also has a land bank of over 1,900 acre and 1,424-acre SEZ.

The Embassy Group has a portfolio of commercial, residential, hospitality assets, among others spanning across the domestic and international markets. It has so far developed over 54 million sqft of commercial, residential, retail, hospitality, services, educational and industrial warehouse spaces and has over 1,000 acres of land bank.

Embassy Office Parks REIT (a JV of Embassy and Blackstone) is the country's first listed real estate investment trust with a market cap of over Rs 32,000 crore now.