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Godrej Properties Underweight
GODR.NS, GPL IN
BKC deal with Jet Airways finally signed
BKC deal with Jet Airways (finally!) signed – Godrej Properties has
finally signed a 50:50 JV agreement with Jet Airways to develop its 2.5-
acre land parcel in Bandra Kurla Complex (Mumbai prime CBD), which
will be accretive by Rs45/share for GPL, on our estimates. The
transaction has been in the news for over a year; however, it was delayed
due to regulatory issues.
Under the proposed deal, GPL will pay Jet Airways Rs1.35B in an
upfront payment and the SPV (developing the property) will assume
Jet’s debt obligation of Rs3.6B. In addition, the JV partners will have to
pay Rs5B as a premium to MMRDA for using the higher FSI on the plot.
Project Plan: Overall the plot is expected to provide 1.2msf of saleable
area, as per the company. Of the total, 0.16msf will be sold to Jet
Airways on a cost basis (including development and finance cost) for its
own use. The remaining area of ~1msf will be developed as office space
by the JV partners. Skidmore, Owings and Merrill (SOM) has already
been signed on as lead architect for the project. We note that debt is
being assumed by the SPV and not by GPL alone. Based on this, GPL’s
effective land cost works out to Rs9.6K psf (including FSI premium).
Our estimate of Rs45/share value accretion factors in an average
realization of Rs33.5Kpsf, construction costs of Rs5Kpsf and completion
timeline of four years (please refer to the table on the next page for
calculations). The average realizations in surrounding areas are in the
range of Rs30,000-Rs35,000psf. After the transaction, GPL’s gross debt
will, however, increase to Rs14.4B, thereby pushing up the net gearing to
~1.4x (one of the highest among the listed property companies).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Godrej Properties Underweight
GODR.NS, GPL IN
BKC deal with Jet Airways finally signed
BKC deal with Jet Airways (finally!) signed – Godrej Properties has
finally signed a 50:50 JV agreement with Jet Airways to develop its 2.5-
acre land parcel in Bandra Kurla Complex (Mumbai prime CBD), which
will be accretive by Rs45/share for GPL, on our estimates. The
transaction has been in the news for over a year; however, it was delayed
due to regulatory issues.
Under the proposed deal, GPL will pay Jet Airways Rs1.35B in an
upfront payment and the SPV (developing the property) will assume
Jet’s debt obligation of Rs3.6B. In addition, the JV partners will have to
pay Rs5B as a premium to MMRDA for using the higher FSI on the plot.
Project Plan: Overall the plot is expected to provide 1.2msf of saleable
area, as per the company. Of the total, 0.16msf will be sold to Jet
Airways on a cost basis (including development and finance cost) for its
own use. The remaining area of ~1msf will be developed as office space
by the JV partners. Skidmore, Owings and Merrill (SOM) has already
been signed on as lead architect for the project. We note that debt is
being assumed by the SPV and not by GPL alone. Based on this, GPL’s
effective land cost works out to Rs9.6K psf (including FSI premium).
Our estimate of Rs45/share value accretion factors in an average
realization of Rs33.5Kpsf, construction costs of Rs5Kpsf and completion
timeline of four years (please refer to the table on the next page for
calculations). The average realizations in surrounding areas are in the
range of Rs30,000-Rs35,000psf. After the transaction, GPL’s gross debt
will, however, increase to Rs14.4B, thereby pushing up the net gearing to
~1.4x (one of the highest among the listed property companies).
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