Trinity Capital exits Gurgaon SEZ at Rs 200 crore loss

Private equity fund Trinity Capital has sold its stake in an SEZ project in Gurgaon at a loss of about Rs 200 crore to the project developer, Delhi-based Uppal group, according to the company’s filing with the stock exchange.

London Stock Exchange AIM-listed Trinity had picked a 33% stake in the project in 2007 for Rs 303 crore. The 67-acre proposed SEZ, however, was put on the backburner due to the slump in demand for office space after the financial crisis that began in 2007, and changes in tax laws.

While the Uppal group confirmed the development, Ajay Piramal group-promoted Indiareit Fund Advisors, Trinity Capital’s current portfolio manager for its Indian investments, declined comment.

Gian Bansal, Uppal group’s chief executive for the SEZ and hotels business, said the company has applied for denotification of the SEZ and plans to develop a township on the land in partnership with another developer. He did not name any firm.

In a recent filing with the stock exchange, Trinity said it has sold its holding in Luxor Cyber City Private Ltd, the investee company, and its share of the proceeds amounts to £9.2 million in cash.

Trinity is one of several foreign PE funds that have exited India’s real estate sector over the last two years. The withdrawals have been largely because of slowdown in the real estate sector, changes in tax laws that have made SEZ projects unviable, and litigations with Indian partners.

Foreign PE funds have invested about $15 billion in Indian projects since foreign direct investment was allowed in the sector in 2005. However, many of them have had to take a haircut, or have managed to just get their principal back.

“While not every investor has been hit, several of them have certainly been taken for a ride,” said Anckur Srivasttava, chairman of GenReal Property Advisers.

Adding to funds’ woes is the sharp fall in the rupee, which last month declined to an all-time low of Rs 68.85. Most of funds had invested when the rupee was between 40 and 45 to a dollar.

The last year and a half has also seen the Indian real estate market lose steam, with both office and residential markets slowing down. Home sales have dropped in many markets and office leasing, too, has been impacted. Office leasing has dropped from 37 million sq ft in 2011 to about 27 million sq ft in 2012.

Another fund to have exited the sector at a deep discount is Ere Anckur Srivasttava, chairman of GenReal Property Advisers.

Adding to funds’ woes is the sharp fall in the rupee, which last month declined to an all-time low of Rs 68.85. Most of funds had invested when the rupee was between 40 and 45 to a dollar.

The last year and a half has also seen the Indian real estate market lose steam, with both office and residential markets slowing down. Home sales have dropped in many markets and office leasing, too, has been impacted. Office leasing has dropped from 37 million sq ft in 2011 to about 27 million sq ft in 2012.

Another fund to have exited the sector at a deep discount is Eredene Capital. In 2008, the fund had invested Rs 131 crore in Matheran Realty and its subsidiary Gopi Resorts for developing a low-cost housing complex near Mumbai.

The development was put up for sale and late last year the fund exited at about Rs 62 crore.

Many funds are also caught in litigation with their partners. Two investors in Delhi-based developer BPTP—Citi Property Investors and JPMorgan Chase — have initiated separate arbitration proceedings against the company for failing to provide a time-bound exit for their investments through an IPO by July 2011.


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