CapitaLand and Pantaloon forge India JV

A $263 million real estate fund is raised to take advantage of the explosive growth in Indian retailing.
Singapore's CapitaLand and India's Pantaloon Retail yesterday (April 19) signed a joint venture agreement for operating in India. As part of the agreement CapitaLand Retail India Investments has subscribed to $75 million of the Pantaloon-backed real estate fund, Horizon Realty Fund LLC. Horizon announced the fund would have an initial closing commitment of $263 million including the CapitaLand subscription of $75 million, which represents 28.5% of the total.

The partnership between Pantaloon and CapitaLand brings together two giants in their respective arenas, both with complementary strengths. Pantaloon is the largest retailer in India with businesses including fashion, food, general merchandise, and home furnishings. It currently has a market capitalisation in excess of $1 billion and close to 3.5 million square feet of retail space.

CapitaLand is one of the largest listed real estate property companies in Asia with a property and hospitality portfolio spanning 70 cities in 18 countries. It is the largest retail mall manager in Singapore with 16 malls and has a strong presence in China with 26 malls. Through the investment in Horizon CapitaLand has now made a foray into India, which is predicted to show explosive growth in retailing over the next few years.

HorizonÆs target fund raising is $350 million. Commenting on the response received by Horizon, Pantaloon's Sameer Sain says, ôthe fund is extremely oversubscribed and we are overwhelmed by the responseö. Sain is the CEO of Future Capital Holdings, which is Pantaloon RetailÆs vehicle for its foray into the financial services arena.

JPMorgan is advisor to Horizon, and comments vice-president, Kaustubh Kulkarni: ôWe have attracted a diversified investor base comprising proprietary funds, hedge funds, real estate players and others. We will judiciously allocate the balance to maintain our high quality investor profile.ö Horizon represents the largest retail-led real estate development fund raising in India which has closed to date.

Horizon will invest in retail real estate development assets in India and has already identified potential investments in Mumbai, Chennai, Bangalore and Kolkata. Each project will have a gross floor area of at least 50,000 square metres and is intended to be a one stop destination for shopping, dining, leisure, entertainment and recreation.

As part of the understanding between CapitaLand and Pantaloon, the two will set up a 50:50 JV retail management company to manage properties which are currently managed by Pantaloon, as well as Pantaloon promoted Kshitij Venture Capital Fund, properties owned by Horizon and properties owned by property funds or REITs jointly created by CapitaLand and Pantaloon. Sain commented: ôWe intend the mall management company to grow into the largest in Asiaö. Capitaland and Pantaloon will also set up a 50:50 JV fund management company with the intention to create a retail development fund, a retail income fund or retail REITs. Capitaland will invest 20%-40% as a sponsor for such funds or REITs.

Said once source: ôThis will, in time, turn into one of the premier REITs in Indiaö.
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