Propshare Capital To Raise Rs 100 Cr In Second Distressed Property Offering
PropShare raised Rs. 80 crores in our first distressed offering PDOF I earlier this year with participation from HNIs and ordinary investors, family offices as well as select institutional investors.
The dislocation in the financial markets on account of the COVID-19 pandemic has created a unique window of opportunity to purchase Grade A assets at below market prices and yields as a result of the COVID-19 pandemic.
The GDP of countries around the world have contracted significantly in the last two quarters as COVID-19 has crippled businesses, travel and consumption. India's GDP has contracted 23.9%, the highest across major countries.
The Realty Index in India is down disproportionately at 23% vs. 6.5% for the Sensex as the sector battles issues such as labour migration, disruption in the supply of steel and cement and lower leasing volumes.
This has provided a rare window of opportunity to acquire high quality Grade A assets with blue chip tenants at significantly higher yields. We saw this play out in our last acquisition of a Grade A Business Park in Hyderabad with a Fortune 150 tenant.
The back office and offshoring centres of Bangalore, Pune, Hyderabad and NCR have remained resilient as these businesses are not as affected by COVID-19 as other industries like hospitality, travel and retail. Leasing has continued to be strong in these centres and large asset owners like Embassy REIT have reported a c. 97% collection of rents in the Apr-Jun quarter.
We believe PDOF is the best way for investors to access these distressed commercial property investments. Our PDOF I offering saw tremendous demand and investors benefited through direct and first access to the Hyderabad listing in addition to higher yields and lower management and performance fees.
Investor funds will be invested in Grade A commercial assets with a minimum yield of 9.5% (including top-up) leased to multinational and blue-chip tenants. Investors can expect returns of 18-20% with our usual quality of listings. Our recent exit in Umiya Business Bay, Bangalore where investors made 18.2% IRR and 1.6x multiple over 3 years is testimony to our conservative investment approach and performance. Our recent PDOF I listing in Hyderabad is indicative of the quality we are looking at for PDOF.
PropShare raised Rs. 80 crores in our first distressed offering PDOF I earlier this year with participation from HNIs and ordinary investors, family offices as well as select institutional investors. A part of this offering has already been allocated to a Grade A property in Hyderabad with an estimated IRR of 19%. The first close of PDOF II is expected this Friday, the 18th of September at c. Rs. 50 cr with a total estimated capital raise of Rs. 100 crores. PDOF II has already seen demand for close to Rs. 600 crores on the platform
Commenting on the announcement, Kunal Moktan, Co-founder & CEO, PropShare Capital said, “The launch of our second distressed strategy is the next logical step as we continue to capitalise on the window of opportunity that the pandemic has created – access to Grade A commercial assets at distressed prices. By investing in distressed offerings, investors are provided 25% lower management and performance fees which subsequently increases their cash yield by upto 1.75%. PDOF investors also get first and exclusive access to all distressed opportunities along with a chance to diversify across at least two investments. We believe returns are made at the time of buying and not selling. In the past, times of distress have led to oversized returns for investors and we expect the same to hold true once this pandemic subsides.”
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