JP Morgan, Apollo Global set to exit BPTP after protracted arbitration battle
Dec 30, 2015
Source : ET


NEW DELHI | BENGALURU: JP Morgan and Apollo Global Management are set to exit entity level investments in Gurgaon-based builder BPTP after a protracted arbitration battle.

 The builder has sold its 800,000 sq ft office building BPTP Crest in Gurgaon to a joint investment platform of Bengaluru-based builder RMZ and Qatar Investment Authority for Rs 850 crore to pay the institutional investors, two people close to the transaction said. 

BPTP will get about Rs 450 crore from the sale of the asset and it plans to pay the rest of the money to the two investors by selling some land parcels in Gurgaon, they said. The sale of the property will also provide an exit to Blackstone, which holds 11% stake in the office building through an earlier investment made by Merrill Lynch, said one of the persons, who did not wish to be identified. 

Merrill Lynch had invested in the asset in 2007 to pick up 49% stake, but BPTP subsequently bought back a part of that stake. Harbour Victoria Investment Holdings Limited, part of JP Morgan Chase & Co group of companies, invested Rs 241 crore in 2008-09 for a 6.21% stake in BPTP. Now, following a long-drawn arbitration in London with BPTP, it will get Rs 360 crore as settlement for its stake in the company. This money, the second person said, will be paid to JP Morgan in two tranches - Rs 300 crore will be paid now and the rest by September 2016.

 Similarly, BPTP has agreed to pay Apollo Global Management Rs 333 crore for its 5.67% stake in the company. Citi Property, now Apollo Global Management, had invested Rs 322 crore in 2007. Apollo Global will be paid in two tranches - Rs 155 crore now and rest by September. In both the cases, if BPTP pays the balance amount after September 2016, it will have to do so along with interest on the remaining amount.

 Kabul Chawla, managing director of BPTP, confirmed the sale of BPTP Crest to RMZ but did not comment on the transaction value. He also said the company is providing an exit to JP Morgan and Apollo Global Management, without disclosing the valuation of the exits. 

Chawla said after giving exit to three of its investors, the company will now be entirely focused on completing all its projects at the earliest by raising construction loans through banks and financial institutions. "We also plan to sell some of our non-core assets to raise funds for meeting our business requirements," Chawla said in an emailed response to a questionnaire sent by ET. 

A spokesman for Apollo Global Management did not respond to an email questionnaire sent by ET. A spokeswoman for JP Morgan declined to comment. 

A spokesman for Blackstone said that as a matter of policy it does not comment on market speculation. RMZ declined to comment on the transaction. Arshdeep Sethi, managing director of RMZ, however, said the company is venturing into the National Capital Region and Mumbai markets after getting a strong foothold in Bengaluru, Chennai and Hyderabad. 

RMZ-QIA has bought the asset at an enterprise value of Rs 850 crore and it will take over a debt of Rs 275 crore on the asset. For its 11% stake, Blackstone will get about Rs 77 crore, said one of the persons cited earlier. 

In dollar terms, while JP Morgan will manage to protect its principal investment post the exit, Apollo Global Management will lose part of its investment. 

Since 2007, stock prices of listed real estate firms such as DLF, Unitech and Sobha have dipped significantly. DLF's stock price on the Bombay Stock Exchange on Tuesday, for instance, was down to a fifth of that in August 2007. 

The deal to sell the building to RMZ-QIA was completed last year and the proceeds were to originally provide JP Morgan an exit. Apollo Global Management, however, filed an injunction in the court against the sale as it wanted a part of the proceeds too. 

Citi Property Investors and JP Morgan had initiated arbitration proceedings against BPTP in 2012 alleging a breach of contract on part of the builder which had failed to provide them an exit in the stipulated time period through an IPO. According to the original terms of the agreement, BPTP had offered the two investors an exit through an IPO. Though BPTP did get a nod from the Securities and Exchange Board of India for a Rs 1,500-crore IPO in May 2010, the builder decided to postpone it due to uncertain market like many other builders at the time. 

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