Hindustan Construction Company (HCC) has demonstrated its ability to monetise its commercial project at a time when the commercial real estate market in India is still not out of the woods. The company, on Thursday, announced divesting 74 per cent of its stake in its commercial real estate project in Mumbai called ‘247 Park’ to IL&FS Milestone Fund.
The company would receive about Rs 574 crore from the divestment. The project valued at Rs 775 crore, was completed in March 2010 with over 85 per cent of the space being leased out at an average of Rs 70 per sq. ft. For real estate funds such as IL&FS Milestone to buy stakes in commercial projects such as 247 Park, the key would be put on block a fully-leased out project. HCC has precisely done this by letting out its projects to big corporates such as Dow Chemicals, KEC International and Future Group.
The average lease rates also lend themselves well to reasonable yields for the buyer. That HCC has chosen to sell the project as soon as it was complete, also suggests that it may be in need of cash to fund other projects. The company is launching 247 Park Phase II with leasable area of 0.75 million sq.ft at a reported cost of Rs 330 crore.
Besides, its recent acquisition of Swiss real estate developer Karl Steiner AG may also entail cash as it intends to plough money in to the company as fresh capital. This together with a larger project at Lavasa could mean that the company cannot wait too long to monetise its existing assets. The HCC stock rose 2 per cent on Thursday following the announcement.