Professional Documents
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Prepared by
Disclaimer
This publication has been prepared by INDIAREIT Fund Advisors Pvt Ltd solely for the information of its clients. This document is being furnished on
a strictly confidential basis. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is meant for use by the
recipient and not for circulation and is not to be copied or made available to others. This document is for information purposes only and does not
constitute an offer for participating in INDIAREIT Fund. Any investment in INDIAREIT Fund must be done on the basis of Private Placement
Memorandum and Offering Documents of the respective Fund and this report may only be distributed to those eligible to receive those documents.
As a general report, this document represents the views of INDIAREIT Fund Advisors Pvt Ltd in relation to the Indian economy and the real estate
industry. The information is based on material that is believed to be reliable. While reasonable care has been taken to ensure that the information
contained herein is not untrue or misleading at the time of publication, INDIAREIT Fund Advisors Pvt Ltd makes no representation as to its accuracy
or completeness. The information herein is subject to change without notice. Nothing in this document is intended to constitute legal, tax, securities
or investment advice, or opinion regarding the appropriateness of any investment. Neither INDIAREIT Fund Advisors Pvt Ltd, INDIAREIT Offshore
Fund, INDIAREIT Investment Management Co, any of the INDIAREIT Funds nor any of their officers or employees accept any liability whatsoever
for any direct or consequential loss arising from any use of this publication or its contents. The information provided herein is subject to being
updated at regular intervals
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INDIAREIT Fund Advisors Pvt. Ltd
Table of Contents
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INDIAREIT in July 2007. Also referred to hereinafter as Domestic Fund III or Domestic
Scheme III
Domestic Scheme IV
Domestic Scheme III, Domestic Scheme IV and Investment Advisor to IOF. Also
8. INDIAREIT Funds Collectively, the Domestic Fund I, Domestic Fund III, Domestic
Domestic Fund Scheme III, INDIAREIT Domestic Fund Scheme IV, INDIAREIT
10. Private Placement Memorandum for INDIAREIT Domestic Fund Scheme V - Also
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11. Offering documents - Includes the PPM, Contribution Agreement, and the marketing
1.1 What is the A real estate fund typically reduces the risk profile of real estate as an
general asset class by offering a diversified investment portfolio managed by
benefit of experienced fund managers. Thus, it provides the dual benefit of a
investing in defensive investment alternative as well as a hedge mechanism by
a real estate offering an alternative asset class.
fund?
Hedging occurs through portfolio diversification, which is through large
location spread and number of projects included in the corpus. Also,
given the large sums of money typically available at the disposal of real
estate funds, their cost of procurement is generally expected to be lower
than for investments made by individuals.
The INDAIREIT Funds enter a project typically at land cost stage. Thus,
the entry cost of the funds investment is far lower than that of an
individual investor.
1.2 How should The key risks involved with investing directly in to real estate projects as
investors compared to investing in real estate funds are as under:
look at
investing Concentration Risk (Please refer 1.1 above)
into Real A real estate fund enables diversification of an investors
Estate investments into various geographic locations, sectors and
funds vis-- developers thus spreading the risks across a broader portfolio
vis Investing directly into real estate exposes an investor to risks of
investment a specific location and sector
into direct
real estate Execution risk
property in Investments by a real estate fund are managed by professionals
the current and are subject to rigorous due-diligence as well as compliance
market? norms for cost, quality and timely implementation
Further, with the assistance of real estate experts a real estate
fund is able to leverage this skill set across its various
investments
Direct investments into real estate might expose the investments
to execution capability risks of a single/few developers
Further, with extensive legal clearances required before
commencing real estate development in India and myriad of land
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Entry/Financial risks
As with any investment, the entry cost is a significant
determinant of the return potential
Fund allows entry at same level as a developer, which an
individual flat buyer cannot enter
Further, with its defined structure returns from a real estate fund
might be more professionally disbursed back to the investors, rather
than in case of individual investments wherein there might not be any
pre-defined exit/closure durations
1.3 Indian Real The coming decade will be different from what the Indian
Estate Real Estate industry has witnessed in the past one. In the residential
Going Ahead market, sentiments are lukewarm, but not significantly weakened.
Markets where the prices have maintained their levels are performing
well despite higher interest rates due to reasonable affordability. The
commercial market segment in the country was under severe stress
over the past couple of years due to the global economic slowdown.
However, the sector has consolidated itself and is now entering a growth
phase. Key factors which will determine the future growth of Indian Real
Estate are easing liquidity, right product mix with size / pricing to
ensure affordability, ability to preserve value / ride cycles and strong
execution capabilities.
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INDIAREIT Fund Advisors Pvt. Ltd
the legal July 2005 as a private limited company under the Companies Act, 1956.
status of the
INDIAREIT INDIAREIT Domestic Funds are registered as domestic venture capital
entities? funds under SEBI (Securities & Exchange Board of India). The norms
and statutes of SEBI govern the functioning of the Domestic Funds.
Funds Valuations
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fund under opportunity for any reason including but not limited to risks related to
the same concentration, the Investment Advisor may at its discretion offer such
General excess portion of the available investment opportunity to the Sponsor
Partner? Group and / or other investors.
What is the In such a situation, the terms of the investments by the Sponsor Group
policy?
and/or the third party investor will not be better than the terms at which
Fund V may invest in Investee Companies.
Ariisto Group
More than 3 decades of experience in real estate
Executed few of the biggest Slum Rehabilitation Projects in the
country for the agencies of Government of Maharashtra for the
prestigious projects of Mumbai Urban Transport and
Infrastructure Projects (MUTP & MUIP). Has also developed a
number of other standalone luxury Apartment Buildings having
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INDIAREIT Fund Advisors Pvt. Ltd
Marvel
Marvel group promoted by Mr Vishwajeet Jhavar, aged 43, an
engineering graduate has been into real estate development
in Pune city for more than a decade
Strong execution capability with 1.3 Mn sq ft (16 projects)
already delivered and a further 15.3 Mn sq ft (38 projects)
under construction
Excellent market reputation in obtaining prime city centric
land parcels, quick project execution and delivery of premium
residential apartments to end customers
Strong network amongst HNI landowners and intermediaries
with de-facto RoFR (Right of First Refusal) on premium city-
centric parcels;
Strong client network of HNI clients enabling developer to
have loyal base of investors for sale of apartments and
powerful brand in Pune synonymous with luxury residential
projects enabling the developer to command a premium on
selling prices vis a vis competition
The group has a team strength of more than 800 personnel,
experienced and professional management at the helm of
affairs with a very strong in house development and sales
teams
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Skyline Group
25-year old group, active in South India
Has concluded more than 60 projects, spread over 4 million
sq ft
More than 2.5 million sq ft under construction with a value
of USD 160 Million
INDIAREIT has 2 investments with Skyline Group with
projects spread across Bangalore, Mangalore, Cochin,
Chennai & Mysore
Amsri Group
More than decade of experience in Hyderabad
Developed over 3 mn sq ft
Land bank of over 1,700 acres to be jointly developed with
various renowned partners/investors like INDIAREIT, Smith
Management LLC and DLF
INDIAREIT has partnered with Amsri for developing ~ 13 mn sq.
ft. spread over 4 projects in Hyderabad
Samira Habitats
Has more than a decade of experience in Alibag & Navi Mumbai
Executed primarily residential layout development projects of
over 400 acres across Alibaug
INDIAREIT has partnered with Samira Group for developing
projects spread across multiple land parcels in Alibaug & Panvel
Ambience Group
More than 3 decades of experience in real estate
Executed more than 250 small and big projects over the years in
and around Delhi and Gurgaon, some of the major ones of which
are as follows:
"Ambience Mall", Gurgaon (the largest operational retail
shopping mall in India (Source: Jones Lang LaSalle Meghraj)
popular all over India for one km of shopping experience on
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INDIAREIT Fund Advisors Pvt. Ltd
each floor,
the "Lagoon" residential complex (a ready-to-move-in
residential apartment complex with 345 units)
an eight-floor corporate office tower
constructed "Leela Kempinski" (a hotel with 322 rooms and
90 service apartments) owned by a Group Entity
All the above a part of the groups premium "Ambience
Island" township at Gurgaon
"Ambience Mall", Vasant Kunj, New Delhi (strategically
located adjacent to Nelson Mandela Road, which is enroute to
the international airport)
The Kempinski Ambience Hotel, Shahdara, Delhi a 480
room 5 star hotel which was recently opened
Apart from above, Ambience has also developed various
residential/commercial properties in posh colonies of South
Delhi.
The group is promoted by Raj Singh Gehlot, a Chartered
Accountant with vast experience in construction and real estate
industry
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INDIAREIT Fund Advisors Pvt. Ltd
Mr. Pahwa has over 30 years of experience in Indian real estate in all aspects of
the business including development, investment and asset management. Prior to
joining Indiareit, Mr. Pahwa was the CEO of South Asian Real Estate Group (2010-
2011) a PE and development platform. For the period of 2009-2012 he was also a
Non Executive Director on the Board of Trinity PLC an AIMS listed RE fund
.Preceding that he was the head of JP Morgan RE Fund (2006-2009) in India where
he was involved in raising USD 350mn and investing USD 170mn. During the same
time Mr. Pahwa has held several senior real estate positions in the country,
including President Reliance Land (1995-2005) and CEO of Lokhandwala
developers (1981-1994) one of the largest residential real estate developers in
India.
Mr. Pahwa is a Graduate from the Delhi University and holds a masters degree in
management from JBIMS Mumbai. He is fellow member of RICS.
Prior to joining INDIAREIT, Sachin was at Kotak India Realty Fund as Chief
Financial Officer, wherein he was primarily responsible for investors' relations,
audit, compliance and fund structuring. He has exposure to various functions
including treasury, loan syndication, assurance/audit, portfolio management, MIS,
budgeting, internal audits, consulting, due diligence and risk management. He is a
qualified Chartered Accountant.
Prior to joining INDIAREIT in 2008, he worked with IBM, UK, based out of London
where he was involved in developing Business Strategies for the various European
and Middle East clients within the financial sector. Prior to his MBA, Pawan worked
for the Global Equities division of Deutsche Bank, Singapore. There he worked as a
Business and Technology analyst for Equity systems of the bank. During his MBA,
Pawan was a summer intern with Corporate Strategy Group of The World Bank,
Washington D.C. He is a B.Tech from IIT, Mumbai and an MBA from Oxford
University, UK.
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INDIAREIT Fund Advisors Pvt. Ltd
Prior to joining INDIAREIT in 2010, Amit was a Director at Jones Lang LaSalle's
(JLL) Asia Pacific Capital Markets team. Prior to JLL, Amit had setup GE Real
Estate's Singapore office, and as head of investments, led transactions in excess of
US$ 250 million in Singapore, Thailand, Malaysia, and Philippines. Amit has also
worked for 5 years at Marakon Associates as a management consultant, and
advised CEOs & CFOs of MNCs in over 10 countries across Asia-Pacific. He holds an
MBA from Indian Institute of Management, Ahmedabad (IIMA), and a Bachelors
Degree in Economics from Shri Ram College of Commerce (SRCC).
3.2Who at IFAPL The back office operations are currently being monitored by the Chief Financial
is in charge of Officer Mr. Sachin Deodhar.
the back office,
name, Please refer above for details of CFO Mr.Sachin Deodhar
qualifications
and
experience?
3.3Indicate the The investment team at IFAPL has witnessed 4 exits. However, the team has been
turnover further strengthened with new members with significant real estate experience
(number of joining in Investment and Asset Management team.
people) that
has occurred in
your Property
teams as a
whole during
the past five
years
3.4Please include Exits were on account of personal reasons .
an explanation
for any unusual
turnover listed
above
3.5Are there any
Senior level positions as far as possible are filled with internal resources thereby
plans to
giving them growth opportunities while ensuring continuation in the policy,
change the
guidelines and philosophy of the fund.
team structure
or staffing
levels in the
near future? Is
it common for
people to
progress their
careers within
your
organization or
are the
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INDIAREIT Fund Advisors Pvt. Ltd
majority of
senior
positions
recruited
externally?
3.7What is the IFAPL was incorporated in 2005, the minimum number of people in the
most and the organization over the last 3 years has been 15 and the maximum 27.
least number
of employees
in the last
three years?
3.8How does the
Presently, the team members have been identified on internal reference basis and
firm attract
through leading head hunters / HR consultants
new people?
As INDIAREIT envisions expanding its team, it has also hired services of specialist
consultants
3.9Please provide
The compensation for the key investment professionals comprises a competitive
a description of
salary and a share in the carry pool.
your firms
compensation IFAPL is entitled to a 40% share in the total carry due from the INDIAREIT Funds.
system for key A major portion thereof is reserved for the key team members of IFAPL
investment
management Please refer PPM for more details on carry structure
professionals &
carry split.
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3. Niraj Bhukhanwala
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INDIAREIT Fund Advisors Pvt. Ltd
Ashish Dalal has till recently been a partner of Dalal & Shah,
Chartered Accountants and has also been a partner of Price
Waterhouse & Co. He has been actively practicing in various
fields relating to Mergers, Acquisitions, Strategic Alliances,
Business Valuations, Specialised Investigations, Due Diligences,
Foreign Collaborations & Joint Ventures and has acted as a
domestic counsel for cross border transactions.
7. Tara Subrahmanium
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4.2How long Projects are recommended to the Investment Committee after a multi
would the level screening at the Investment Advisor level with inputs from
investment independent third party consultants who may be hired for due diligence
advisory on land titles etc. The total process of conducting due diligence post
committee identification of a project takes about 4 8 weeks.
typically take
on due Thereafter, the project is presented to the investment committee, which
diligence of accepts or declines an investment proposition. Post, acceptance by the
each investment committee, the project can take anywhere between 4 6
project? weeks for the conclusion of the deal.
4.3Please give Fund V will attempt to achieve its objectives by investing in equity,
an outline of equity related, and debt instruments of unlisted real estate
your firms companies across various cities in India and across various segments
investment
of real estate. Fund Vs investment will be in construction and
guidelines,
restrictions development projects which shall be identified on the basis of in-
and its depth research and analysis of the demographic profile,
investment infrastructure developments, and the growth drivers emerging in
philosophy various cities. In addition, Fund V's investments will be in
accordance with generally accepted CSR guidelines.
Focus Segment
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Downside Protection
Investment Structuring
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Concentration Limits
For Cities other than Mumbai, the Investment Advisor will limit the non-
residential elements to 20% (i.e. the projects would be at least 80%
residential).
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INDIAREIT Fund Advisors Pvt. Ltd
Could you External Marketing Citi Bank, ICICI Bank, HDFC Bank, ABN Amro
provide Bank, Standard Chartered
names of
external
professionals Fund Administration - IL&FS Trust Company Ltd, as Trustees
and their
Fund Accounting Confisys Solutions for Fund Accounting
specific
tasks? Backoffice Service Provider - CAMS for collection and backoffice
support
4.5What are the Due Diligence may be broadly sub-divided into Commercial, Technical
items for due and Legal due diligence. Commercial due diligence establishes demand,
diligence rate and off-take potential for the property. Technical due diligence
validates, regulations, plans, architectural nuances etc. Legal due
diligence establishes the title of the property and feasibility of sanctions
and approvals. Further, the team also conducts due diligence on the
delivery capability of the developer including his financial solvency. In
addition, the team also engages the services of local municipal experts
in various regions to understand the sanctions feasibility for any given
project.
4.6Describe in Detailed due-diligence of a developer / property is undertaken at various
detail the levels of analysing and recommending the investment opportunity.
firms due Some of the parameters considered include:
diligence Verifying promoters credentials and track record. This is done
process. through actual site visits to developers existing sites; third-party
Provide referrals and analysing published data
examples of Accessibility and market potential study of the site
reports and Primary market survey of competing developments thus
working understanding the sectoral opportunities
papers, Due diligence on our development partners by a third party
where entity on a case by case basis
available Analysis of key past trends to help ascertain the future scenario
Status of various approvals required for the development at a
site and availability of the same with the developer
Land title scrutiny through employing services of legal
consultants
Confirmation of FSI details assumed
Compliance with guidelines on environmental protection, social
and rehabilitation issues, if any
Verifying the project cost and financials indicated by the
developer. This may be done by commissioning independent
valuation report as well as a geographical analysis of a given site,
by relevant consultants
Verifying key assumptions made by the promoter
Detailed financial analysis with sensitivity analysis
Estimation of project IRR and equity IRR under varying scenarios
Possible exit strategies, clearly indicating timing and key
assumptions on which it relies
Assessment of potential risks and proposed mitigations
Proposed optimal deal structure including taxation
Detailed evaluation and understanding of proposed terms on
offer
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INDIAREIT Fund Advisors Pvt. Ltd
For areas not covered under initial review, a further detailed analysis is
carried out during the Due-Diligence stage of the project evaluation.
The analysis is then presented to the relevant Investment Committee
for its approval.
A copy of the Investment Committee Note and Presentation for a
typical deal can be shared with the investors during their due diligence
4.7Will any IFAPL believes that investments made by the INDIAREIT Funds are
expected backed by extensive prudential norms and are structured to provide
price downward protection. We build in conservative assumptions in all our
correction projects with regard to the business plans, costs and revenues.
impact entry
and exit Additionally INDIAREIT has the right to extend the exit period by 2
valuations periods of one year each in case market conditions are not conducive for
for the exits.
investments
advised by Hence, INDAIRET Funds should normally not foresee significant change in
IFAPL? their
targeted net return to the investors.
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3. Investment Strategy
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Focus Segment
Downside Protection
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Investment Structuring
Concentration Limits
For Cities other than Mumbai, the Investment Advisor will limit the non-
residential elements to 20% (i.e. the projects would be at least 80%
residential).
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group
III. Single City (Metros) 70
IV. Non Metro Cities 40
V. Single segment Residential
Minimum 70
Commercial/Others
30
VI. Development Focused 100
Investments
Target IRR
Gross IRR of 24% plus
Investment Period
2+1 years from interim close
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5.2What is the Please refer to the Offering Documents of the Fund for details on units.
nature of
instrument /
unit allotted
to Investors
5.3Who can Resident Indian investors (Institutions, Corporates and HNI)
invest in
Domestic
Fund V?
5.4Is there any There is a structural lock in for investment, since return of capital is
lock-in period limited to actual exits. Also the fund does not buyback units and also
for units are also not listed in the market. So till such time project dont
investment? mature / exit and cash flow is not received from the project, investment
Is there a cannot be redeemed.
provision for
early exit? Investor has an option of third party sale of fund units.
5.8 Can you IFAPL has a robust Investors Relations cell in place, which answers any
answer investor query quickly.
sudden
inquiries by Since most of the investors are being referred to us through leading
investors? banks, the investors queries are primarily answered directly by
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5.12 In case I IFAPL has an Investor Relations team that is dedicated to directly
have any answer investor queries.
concern or E-mail: investors@piramal.com
grievance Phone: +91-22-6151 3440
whom can I
approach?
5.13 What is the The initial closing of Fund V has been held upon receiving capital
concept of commitment of INR 50 crores. The Investment Advisor will hold
Interim Interim Closing on receiving Capital Commitments equal to or more
Closing?
than INR 300 crores. However, the Investment Advisor may, at its sole
discretion declare Interim Closing upon receiving Capital Commitments
for an amount lower than INR 300 crores.
5.14 What are The upcoming deal pipeline can be shared on request.
some of the
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INDIAREIT Fund Advisors Pvt. Ltd
indicative
upcoming
projects
that IFAPL
is
evaluating?
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i. Sourcing / Initial vetting of deals: The Investment Advisor will identify potential deals
though extensive research, tender invitations, tie-ups with reputed real estate
consulting firms, merchant bankers, investment advisors and through relationships. The
Domestic Fund V will lay down sound principles and processes for identifying
builders/developers of repute and track record. Due weight will be given to the
professional approach of the developer. The Investee Companies will be selected based
on a combination of management teams, professional skills, track record and growth
potential, existence of a sound business plan, and availability of sound exit options
ii. Filtration: The Investment Advisor will vet the deal, to filter out those that do not match
the Fund investment criteria. Here the focus will be on the Mumbai Market with early
stage entry, well-defined exits, low cash out to developer, structured to provide
downside protection
iii. Preliminary evaluation: Emphasis here will be on in-depth research both at macro and
micro levels. For example the macro level analysis for a mixed-use development would
cover the sectoral trends, demographic patterns, economic growth, social infrastructure
such as educational institutes and infrastructure projects like connectivity, water and
power supply proposed for the city. This would enable the fund to identify potential
green field projects with high potential of capital appreciation. At the micro level,
emphasis would be on the project location, capabilities of the developer, existence of
rights and title of property, etc.
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INDIAREIT Fund Advisors Pvt. Ltd
iv. Detailed evaluation, due diligence and structuring of proposal: Emphasis here will be on
continued in-depth research and due diligence to minimize the risk. The financial and
legal due diligence would include the entire business model, the organization, the legal
framework, and regulatory compliance. Financial engineering to optimize returns would
be conducted and risk mitigation measures put in place. This would result in
maximizing the returns for the contributors by way of capital appreciation. Subsequent
to detailed evaluation and due diligence Investment Advisor will prepare the proposed
final terms of investment.
vi. Post investment monitoring: Investment monitoring will be done through participation
in key project decisions and/or monitoring the progress of the project through periodic
project updates and company visits. Domestic Fund V can provide value addition to the
project by helping in identifying the proper mix of consultants such as master planners,
design architects, constructors etc.
5.18 Do INDIAREIT As of now, all investments under the INDIAREIT Funds have been
Funds invest in solo investments. However, the INDIAREIT Funds are open to
each project as a participate with other funds/ investors.
sole investor, or do
you co invest with
other funds?
5.19 What are the Pursuant to preliminary analysis of the investment proposal by
checks and investment advisor, a detailed evaluation, due diligence and
balances that the structuring of the proposal is done. Here emphasis will be on
Fund adheres to continued in-depth research and due diligence to minimize the
prior to making risk.
investment The financial and legal due diligence would include the
decision? entire business model, the organization, the legal
framework, and regulatory compliance
Financial engineering to optimize returns would be
conducted and risk mitigation measures put in place with a
view to maximizing the returns for the contributors by way
of capital appreciation
Developer balance sheet is analysed to determine financial
strength of the developer to fulfil its commitments
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5.20 How does IFAPL IFAPL evaluates developers on multiple criteria before taking an
select developers? investment decision. Some of these include:
Experience in real estate development with the developer
in the particular geography where the investment is
proposed
Total built up area developed in the past and the proportion
of development in the particular segment (residential,
commercial, etc) with the developer
Track record in terms of timely delivery, quality, dealings
with various stakeholders like land owners, buyers,
financial institutions ascertained through reference checks
and third party due diligence through international property
consultants where deemed necessary
Organizational structure, books of accounts, internal MIS
for the past transactions and manpower profile of the
developer
5.21 Elaborate on Some of the basic details that developers are expected to
guidelines/require share/disclose include:
ments in terms of
disclosures Title and legal status of the project
expected from Various approvals required and current status of the same
developers to carry on desired development
Various assumptions undertaken
Basis of financial projections
Detailed architectural/structural plans
Details on competing projects in the site vicinity
Any market data to support demand/sales projections
Details of various business partners they plan to engage for
project
Corporate structure/existing shareholders and their
holdings in the company
Last 3 years financial details, balance sheets etc. for the
company
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EXIT STRATEGIES
5.22 Please provide Exit strategies in respect of investments made by Fund V shall
details of exit include but not be limited to:
strategies /
(a) Direct sale of product to end customers, especially for
procedures
including: residential project
Details of (b) Sale to existing REITs, funds, funds of funds or other similar
preferred exit entities;
scenarios.
(c) Asset securitisation either onshore or offshore; or
The Limited
Partners Role (d) En-bloc sale to institutional investors.
in the decision (e) Potential listing in case of Enterprises level investments
making
(f) Sale of stake to development partner or third party buyer
process. For
example, the
degree of
approval /
advice sought
from Limited
Partners on
exit strategies
5.23 As to the INDIAREIT Funds expect to maintain a portfolio of primarily
properties residential properties. INDIAREIT may also choose to invest in
being commercial properties if the opportunity is deemed to be
developed, are favourable.
they going to
be sold to third The residential properties would be sold to third party buyers to
parties after generate consistent cash flow.
completion or
will they be The commercial properties may be developed, leased out and sold
rented out? to earn an optimal mix of lease rentals and capital gains. The Funds
Are they going will seek buyers for the entire buildings/ properties depending upon
to be tax incidence and the regulatory framework including opening up of
sold/rented REITS/ listing potential for the investee company holding such
out by the property, etc.
building (as
opposed to by Overall, the exits will be done on case-to-case basis, taking into
the floor, room, account the tenure of the fund and the nature of the real estate
etc.), or is it market.
case by case?
5.24 How will you Sales will be undertaken by the developer right through the project
assess the execution phase. The sale price will depend on prevailing market
value of conditions in the area that the project is taking place.
property when
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5.27 In case you This could be subject to fund tenure. IFAPL expects most of the
rent out Fund projects to have a development/ construction horizon of 4-5
completed years. Where the properties are rented out, IFAPL will seek to
properties, maintain a rent out period to ensure exits are within the tenure of
what is your the Fund.
stance on the
holding period
(rent-out
period)? How
long do you
expect to hold
properties for
renting, from
the time of
project
construction
start until the
Fund sells it
out to a third
party?
5.28 Is there any It is not envisaged that Fund V will go public
possibility that
Fund V shall go
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INDIAREIT Fund Advisors Pvt. Ltd
public?
5.29 Please specify As a policy, IFAPL will advise on the launch of fresh schemes under
controls in the Domestic or Offshore umbrella only once the existing Domestic
place with or Offshore Fund has been committed at least 70% for investment.
regards to: Further, there are co-investments by the existing Domestic and
- Any conflict Offshore funds as described in the co-investment plan.
with other
funds under Currently the Offshore fund is fully deployed and hence co
management investment is not foreseen until a new Offshore fund is raised.
- Use of
independent The portfolio investments are made as per the guidelines for
valuers to maximum investments as described in Section 2 and 4. The exit
secure stock strategies are the same for different funds, thus, there should be no
conflict of interest within different funds.
Exit Risk
5.31 How does Downside risk is protected by one or more of the following
IFAPL address mechanisms
downside
Work on a preferred return of capital, with a minimum-
performance?
return benchmark, with the developer. In such
arrangements, the developer gets rewarded through higher
share of profits post reaching benchmark deliverables
Entry at land cost stage only with no premium over the land
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INDIAREIT Fund Advisors Pvt. Ltd
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INDIAREIT Fund Advisors Pvt. Ltd
kinds of
problems that
have arisen in
properties
realized or
valued below
cost. State how
these problems
were solved.
5.34 In case a The team at IFAPL is confident that it will be able to advise on or
developer fails manage the take over any incomplete project and execute it
to complete a smoothly given the involvement of the team in the development of
project and the the project at each stage, including appointment of third party civil
INDIAREIT contractors and other third party service providers.
Funds take it
over, how With Mr Khushru Jijina at the helm, supported by a strong asset
smoothly will management team, we have competence within the team to
the Funds be complete a project should the developer fail to do so.
able to take
over and
complete the
Project?
5.35 Which deals INDIAREIT Funds have successfully completed four exits in its
from the earlier Domestic Fund Scheme I, III & Offshore Fund:
funds proved Maiden investment in residential project (Signature Island)
successful and exited in Sept. 08 with 2.22x net money multiple
which deals Exit from commercial project (Neptune Evolution Kurla) in
proved Nov10, translating into 2.97x net money multiple.
unsuccessful? Partial exits done from Bangalore Retreat, Ariisto Sapphire,
Samira, Alpha City, Ariisto TDR
5.36 Will there be Depending on the size of the fund, each of the INDIAREIT Funds
an opportunity might have one or more cornerstone investor(s) that will have
for the clients contributed to a sizable portion of the total fund, and is in a position
to express to add value to the fund. Such a cornerstone investor may have a
their seat on the Investment Committee as well as a Board seat and will
investment accordingly get an opportunity to express his views on the
views (what investment opportunities available to the Fund.
are the criteria
for an investor
to be a member
of an advisory
committee?)
Cash Flows
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INDIAREIT Fund Advisors Pvt. Ltd
to remit the
money?
5.38 How is the The Fund will endeavour to realize cash proceeds from all its
Residual Value investments within the term of the Fund. IFAPL believes that the
intended to be average holding period of investments advised by it will be 4-5
allocated at the years.
end of the
winding-up of The Fund may only make in-specie distributions if it is unable to
Fund V? dispose of its investments within the term of the Fund.
5.39 What is the The Fund shall not make reinvestments of Distribution
policy Proceeds.
regarding re-
investment of
investment
proceeds?
5.40 Describe the
2.0%, 1.75% and 1.5% p.a. for Class A, B & C units respectively
management
fee structure of
Fund V
5.41 What are the The Funds initial expenses, including setting up costs, legal fees,
expenses that incorporation and registration expenses and fees, placement and
shall be borne distribution fees and commissions to be paid to intermediaries,
by Fund V? (Initial Expenses) shall be borne by the Fund, and shall not
exceed 2% of the aggregate Capital Commitments of the Company.
The Investment Advisor shall bear any Initial Expenses that exceed
2% of the aggregate Capital Commitments of the Company
The annual Fund Expenses to be borne by the Fund shall include the
following:
All operating expenses of the Company and the Alternative
Investment Vehicles, if any
Management fees
Expenses payable to all service providers, including,
Administrators, auditors and lawyers
Incidental expenses including expenses relating to execution
of any agreements, for purposes other than consummation
of the transactions
Expenses incurred by the Company for collection of the
Capital Commitments;
Placement/distribution fees/commissions in connection with
sale of Shares of the Company
Legal and statutory expenses
Travel expenses of directors of the Company
Fees for seeking professional advice
Taxes imposed on the Company and the Investments
Banking charges
Costs of preparing and circulating financial and tax reports to
shareholders; and
Insurance premiums
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INDIAREIT Fund Advisors Pvt. Ltd
5.42 Explain the Hurdle is a milestone rate of return. The Carry-ratio of profits of
terms Carry 82.5:17.5 ( 85:15 for commitment INR 1 crore to INR <10 crores
Ratio of Profits and 87.5:12.5 for commitment more than INR 10 crores ) between
and Hurdle? the Investors and the Fund Advisor is shared on the entire corpus
only after achieving the minimum preferred rate of 12% p a in the
case of Domestic Fund V. After the investors get the entire principal
and a minimum return at the preferred rate of 12% back, the
Investment Advisor becomes eligible to share the profits.
5.43 What is the The Fund has no re-investment policy and the proceeds will be
policy for distributed amongst investors on pro-rata basis.
treatment of
profits arising
out of the
projects? Will
these profits be
ploughed back
in the fund or
will be
distributed
upfront to the
shareholders/
investors?
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INDIAREIT Fund Advisors Pvt. Ltd
6.2What is the basic Each investee company is in the form of a special purpose vehicle
structure of the created to undertake the specific projects and its legal status
individual is that of a private limited company incorporated under the
investee Indian Companies Act, 1956 and registered with the
entities? Registrar of Companies.
6.3Do individual The special purpose vehicle is the entity in which the developer and
investee entities the INDIAREIT Funds have an economic interest. It is
(Special Purpose possible that the SPV has other investors, including other
Companies) have financial investors.
other investors
than the
INDIAREIT
Funds? (i.e.
developers,
constructors,
etc.)
6.4Who will bear All expenses relating to the initial transaction costs of making an
the cost incurred investment are borne either by the Fund or by the SPV. All recurring
at each or annual operating expenses of the SPV are borne by the SPV.
investment Please refer to the Offering Documents for details on Fund
(including initial expenses.
and annual
costs)?
6.5What kind of The following measures are used:
countermeasure
s do you have Firstly, outsourcing the construction to contractors/ developers at a
against cost fixed price.
overrun and time
overrun? Secondly, having an asset manager at the developers site, to track
the developments at the construction site and to guide, liaison with
the Project Managers and the Developers.
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INDIAREIT Fund Advisors Pvt. Ltd
minimal risks
Monitoring of cost, quality and timing of delivery through
tight monitoring and control over projects and understanding
of the market place
Recommendation on structuring of exit
6.7What are the Typically, the shareholders agreements provide for veto rights on all
typical rights important decisions of its investee companies including but not
that the funds limited to:
have at the SPV
level? Cost, quality and timely delivery schedules
Do you typically Shareholding structure, dividend policy, exit rights and first
take a Board rights of refusal pertaining to all major events involving the
Seat in the partner developer
portfolio Right to take over the project and complete it if the
companies? developer is unable to complete the project within a pre-
agreed time line
Policy matters regarding purchase of materials, choice
contractors and suppliers, sales process and treatment of
sales proceeds
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INDIAREIT Fund Advisors Pvt. Ltd
as denial of
ownership?
7.4What is the tax Under the SEBI (AIF) Regulations, 2012 as notified, existing funds
treatment for (including Domestic Fund V), shall be governed under Regulation
any distributions 3(2) thereof. The concerned regulation clarifies that such funds
that will be would continue to be regulated under the VCF Regulations till it is
made by wound up, including raising commitments up to its targeted corpus.
INDIAREIT The only restriction is that it may not be permissible for such funds
Fund? to raise its targeted corpus.
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INDIAREIT Fund Advisors Pvt. Ltd
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INDIAREIT Fund Advisors Pvt. Ltd
them?
8.1Who are the Piramal Enterprises Ltd is the sponsor of the Domestic Funds and
sponsors? IFAPL acts as the Investment Advisor to the Offshore Funds and
the Investment Manager to the Domestic Funds.
8.2Please provide Piramal Enterprises Ltd (PEL), a flagship company of the Piramal
some Group, is a globally integrated Enterprises company. PEL has
background diverse product portfolio spanning several therapeutic areas.
about the It is also one of the largest custom manufacturing companies
promoter group. with a global footprint of assets across North America,
Europe and Asia. PEL has now ventured into financial
services for lending and fund management for Infrastructure
and other sectors. It has a growth track record of above
29% CAGR since 1988.
Ajay Piramal is the Chairman of the Piramal Group and heading
a multibillion dollar industrial group, having diversified interests
in pharmaceuticals, glass containers, financial services and real
estate development. Within the group, the leading companies
are, inter alia, Piramal Enterprises Limited, Piramal Life Sciences
Limited, Allergan India Limited, Piramal Glass Limited and
Piramal Realty Limited.
8.3How is Piramal Piramal Enterprises is not involved in the day to day running or
Enterprises management of any project / investment made by any of the
involved in each INDIAREIT Funds. The independent management team at
project? IFAPL, with adequate experience and understanding of the
Indian Real Estate market, is involved in the management
and monitoring of various Fund projects.
8.4In contractual The Developer is the leader/promoter of each development project.
terms, who is
the leader of
each
development
project?
Developers, or
the promoters of
the fund?
8.5What are the Decision making of the respective Funds is governed by its
relationships Investment Committee, which is detailed above in Section 3
between the (constitution of the IC) and Section 5 (investment process).
developer,
builder/construc Each of the INDIAREIT Funds enters into an agreement as a
tor, the Piramals financial investor with third party developers. However,
and the Fund (in IFAPL closely monitors the progress of the project to ensure
terms of the timely, cost efficient and quality output.
contracts)?
8.6What are the
profiles of the Ajay Piramal
board members
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INDIAREIT Fund Advisors Pvt. Ltd
of the Fund?
Ajay Piramal is an eminent business personality in the global
corporate world. His educational qualifications are B.Sc. (Hons.)
from Bombay University, Master in Management Studies from
Jamnalal Bajaj Institute of Management Studies and Advanced
Management Programme, Harvard.
Khushru Jijina
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INDIAREIT Fund Advisors Pvt. Ltd
Vallabh Bhansali
Niraj Bhukhanwala
8.7Does IFAL or the Neither the Funds nor IFAPL get any incentives from the developer.
fund get any
incentives from
the developers?
8.8Are there any No, there are no financial relations between the developer and the
financial- administrative company.
relations with
developer as
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INDIAREIT Fund Advisors Pvt. Ltd
well as
administrative
company?
8.9What is the INDIAREIT has no relationship to Peninsula Land Management
relationship with Company. Both operate in their independent capacities in their
Peninsula Land distinct spheres.
Management
Company, which
is headed by Mr.
Rajeev Piramal?
Is there a
corporate
relationship to
manage real
estate business
of INDIAREIT
Fund, or are
conflicts or
competitive
environment
expected to
emerge?
47