Citi, Merrill likely to invest Rs 2000 cr in DLF realty

Source: Economic Times
NEW DELHI: Global financial firms Citigroup, Merrill Lynch and DE Shaw are likely to invest Rs 2,000 crore or $500 million in the DLF Assets’(DAL) real estate investment trust(REIT), according to sources. The transaction is likely to be completed by early next week. Part of DLF Group, the largest real estate developer in the country, DAL is focused on buying and managing office space. Currently, DAL is a owned by DLF promoters and the listed firm has no equity stake in this firm. However, as per the plan, DLF will also invest $750 million or Rs 3,000 crore in the REIT. DAL had earlier planned to list the REIT, but now is going for a private placement. DLF spokesperson declined to comment saying that the Singapore market regulation didn’t allow company to make any comment on the issue as its application for listing of REIT was still being scrutinised by the authorities. DLF Assets originally planned to raise $2 billion through its REIT called DLF Office Trust. Given the downturn in the global financial markets, DAL has now put on hold its plan to list the REIT. In the meanwhile, it is going ahead with its fund-raising plan through the private-placement route. According to sources, DLF Office Trust will now be a private trust, raising money only through institutional investors. A private trust, unlike a public trust, is not listed and doesn’t have retail participation. DLF had originally planned to have 10% retail investors in its REIT.
Sources add that DLF was reluctant to go in for the public offering as it felt the share prices may not be able to hold the price on listing even if it were to subscribe fully. The company is now in negotiations with Citigroup and Merrill Lynch apart from US-hedge fund DE Shaw, who are likely to put in a combined sum of Rs 2,000 crore in the trust. Citigroup is likely to be the lead investor in the transaction. According to sources, DAL would use the funds to meet its debt obligations which are due by the end of March’08. Real estate developers see REIT as an avenue to cash out of property investment. DAL owns five IT SEZs, purchased from DLF. For DE Shaw, this would be yet another exposure into DLF Group. Last year, it invested $400 million in DAL. US-based investment bank Lehman Brothers, too, had pitched in with $200 million in DAL at that time. The other investor, Merrill Lynch, one of the world’s largest securities firm, had bought 49% in DLF’s seven housing projects for Rs 1,481 crore or $377 million. These projects are spread across the cities of Chennai, Bangalore, Kochi and Indore.