Madhucon to set up 2 hotels in Hyderabad

This story first appeared in DNA Money edition on Thursday, September 8, 2011.

Madhucon group, which is into construction, granites, coal, power and sugar, is foraying into the hospitality sector. Nama Hotels Pvt Ltd (NHPL), its associate company, is developing two hotel projects in Hyderabad, which would be managed by InterContinental Hotels Group (IHG) — the world’s largest hotel management company by number of rooms.

IHG said it has signed four new management contracts in India, of which two developments are from Nama Hotels. According to IHG, both these hotels will start receiving guests by 2013.

The two Madhucon hotels under construction are part of a mixed-use development consisting of a shopping mall and commercial and office space.
This entire project is spread over a nine acre land parcel located opposite Jawaharlal Nehru Technological University at Kukatpally in Hyderabad.

“The two hotels will be managed under Holiday Inn Express and Holiday Inn brands featuring 160- and 360-rooms, respectively,” said an IHG update.

A Holiday Inn property in India is positioned as a mid-scale product while a Holiday Inn Express is a select service offering for the value seekers.

Between both the projects Nama Hotels is likely to incur an overall cost of Rs140-150 crore.

The IHG update said that a 179-key project in Sarjapur in Bangalore has been signed under Holiday Inn Express brand to be developed by Duet Smart Hotels India.

Another Holiday Inn Express to be developed by realtor JMD Group on the Golf Course Extension Road in Gurgaon, Haryana, will feature 168 rooms in total.

Both hotels are expected to be operational by 2013.

With the four new agreements, the IHG’s under-construction hotels in India have risen to 47 across its InterContinental, Crowne Plaza, Holiday Inn and Holiday Inn Express family of brands. The new hotels will add approximately 900 rooms to IHG’s planned 10,000 India room inventory over the next two-three years.

The hotel company currently operates 15 hotels in key Indian cities and is on track to have a 150-hotel presence by 2020, Jan Smits, chief executive officer, IHG AMEA, said.

“A host of Holiday Inn and Holiday Inn Express hotels are being planned to serve guests across key Indian cities. And as we increase our presence in India,” Smits said.

Hero Group putting up a Rs650 crore hotel in Gurgaon

This story first appeared in DNA Money edition on Tuesday, September 6, 2011.

Hero Group, India’s largest two-wheeler maker, has added a new business vertical by acquiring a distressed hotel project at Club road in Gurgaon.

Pankaj Munjal, managing director, Hero Motors, told DNA, “This is the first step towards building a new business vertical in the group. The hotel is on a 3.9 acre plot and will have 280 rooms in addition to a host of other facilities required to position it as a destination property,” said Munjal.

Hero Motors provides integrated design, engineering, manufacturing & supply chain solutions.

The group is targeting to open the hotel by Diwali next year and is looking to set up more hotels.

The site, a cold shell, was acquired through a bidding process organised by Punjab National Bank (PNB). Industry sources said the project was on the block for over two years and it earlier belonged to Narsi Group, which is in the business of turnkey interior fit-out.

The Hero Group intends to build a landmark five-star deluxe hotel to be branded, operated and managed by one of world’s top-end hotel companies.

While Munjal did not share the acquisition cost of the project from PNB, he said the total cost, including finishing the hotel, will be around Rs650 crore. “This is an all inclusive cost and funding the development will be done through internal resources,” Munjal said.

The Hero Group has kick-started the process of identifying a hotel company to manage the property. It is considering international groups like Four Season, Conrad and JW Marriot.

“We have had initial discussions with a host of global hotel companies. We should be in a position to finalise the hotel management partner very soon after which interior work will start based on the management company’s guidelines,” said Munjal.

Munjal said the group has a healthy land bank thanks to a host of manufacturing units spread across the country. Some part of the land bank may be usedfor setting up hotels, he said.

Milestone Capital founder Ved Prakash Arya dies in an accident

Founder, managing director and CEO of Milestone Capital Advisors, Ved Prakash Arya passed away in an accident on Thursday (August 25, 2011). Forty-one year-old Arya, was taking a morning walk when a tree fell on him. He is survived by his wife and two children.

A driving force for Milestone, Arya successfully launched eight private equity schemes and prior to Milestone, he was chief operating officer (COO) and director of Pantaloon Retail (India) Ltd, a position he quit in February 2007. Prior to that he was associated with a department store chain - Globus - in the capacity of its CEO. He'd also founded this (Globus) retail chain in 1998 during his over a decade-old tenure with the Rajan Raheja group.

Arya was also the founder and director of the Retailers Association of India - RAI. An engineering graduate with an MBA from IIM, Ahmedabad he also spent one year in ESSEC (France) doing research and completed his Advanced Management Programme from Harvard Business School.

Carlyle to invest $26 million in Value & Budget Housing

While one side real estate companies are finding it tough to attract investments, Bangalore-based value & Budget Housing Corporation (VBHC) has roped in The Carlyle Group for a private placement in its venture.  The global alternative asset manager has agreed to invest $26 million in VBHC that pioneered the construction and development of affordable entry level housing in India. Avendus Capital served as the sole financial advisor to VBHC for the transaction.

Wayne Tsou, managing director and head of Carlyle Asia Growth Capital, said, VBHC is a play on the strong unmet demand for affordable housing in India, which is estimated at more than $200 billion. “The demand for affordable housing will continue to grow quickly due to urbanisation, increasing number of nuclear families, rising income levels and strong desire for home ownership,” said Tsou.

The funds to be placed in VBHC will be from Carlyle’s FCG IX which is a part of Carlyle Asia Growth Partners IV (CAGP IV) – a $1.04 billion sector-agnostic growth capital fund. Existing investors in VBHC have also committed additional capital alongside Carlyle though detailed financial terms were not made public.

Co-founded by Jaithirth Rao and P S Jayakumar to build one million affordable entry level homes over 10 years across urban India, VBHC has already sold more than 1,000 units in the last 12 months and the sale of another 900 units is expected to start next month. VBHC is setting up an expansive network of integrated housing projects across the country using the latest industrial engineering and construction technology to improve the construction process and build scale through standardisation.

According to Jaithirth Rao, chairman, VBHC has been focusing on delivering high quality affordable entry level homes to its customers. “Through The Carlyle Group association, we hope to leverage their relationships as we continue to fulfill our vision of building a million affordable entry level homes in this country,” he said.

Transforming real estate development into a lean industrial process amenable to mass production with the use of the ‘form’ technology for construction, “VBHC plans to replicate the success of project Vaibhava in Bangalore and aims to develop a strong nationwide footprint,” said P S Jayakumar, managing director, VBHC.

Oberoi Realty ropes in a global contractor for key Worli project

This story first appeared in DNA Money edition on Wednesday August 24, 2011.

Despite the real estate sector going through a tough time, a section of developers continue to pursue signature projects in Mumbai with undiminished exuberance.

Oberoi Realty has brought on board Samsung C&T Corporation as its general contractor for its ambitious mixed-use, high-rise luxury project in Worli, Mumbai.

The deal marks the entry of Samsung C&T, which has constructed many of the world’s tallest landmarks including Petronas Towers in Kuala Lumpur and Burj Khalifa in Dubai, in the Indian real estate space.

Vikas Oberoi, chairman and managing director, Oberoi Realty, said, “This association will enable us to strengthen and grow our vision of bringing the best international construction practices to India and contribute one more landmark to the skyline of Mumbai,” he said.

To be developed by Oasis Realty, a joint venture between Sahana and Oberoi Realty, the development will feature a luxury hotel, luxurious branded residence (managed by a hotel operator) and high-end commercial office space with a likelihood of luxury retailing area.

The hotel and branded residences, industry sources said, will likely be operated by luxury hotel company, Mandarin Oriental Hotel Group.

The Oberoi-Samsung tie-up substantiates the trend of hiring specialist international companies to create products that would appeal to not only the crème de la crèmein India but also potential buyers across the globe who wish to boast of owning a residence in one of world’s most expensive real-estate markets, experts said.

Earlier, Lodha Developers had awarded the construction contract of World One, its flagship project in Worli, to a joint venture formed by Middle-East based construction firm, Arabian Construction Company, and India’s Simplex Infrastructures.

Experts said the approach of bringing renowned global partners for real estate projects is to create a wider appeal for the developments and attract global buyers.

“For instance, Lodha’s World One was being premiered across the globe, more so in New York and Tokyo in addition to key cities in India. As a result, the developer was able to pre-sell World One and close a significant percentage (around 40% of the overall inventory) of bookings during that period,” said a source.

YeonJoo Jung, president and CEO, Samsung C&T, said the deal was a remarkable milestone for the company as it would be their first such project in India.

“We apply extensive experience, expertise and knowledge in construction and project management especially for high rise buildings, therefore the successful completion of this iconic building would also be vital for our future growth in the Indian market,” said Jung.

The Oberoi project is likely to be launched this October.Sources said details of the Oberoi project have not been made public as yet because, “the developer is still in the process of getting a clear picture on the floor space index allocation for it”.

Ritz-Carlton set for India debut in April 2012

India's first Ritz-Carlton branded hotel is set to receive guests by April 2012. The 250-room five-star luxury hotel is being developed by Bangalore-based BSE-listed realtor Nitesh Estates Ltd. Work on the hotel is in fairly advanced stages and the asset owning company intends to hand it over to the Ritz-Carlton pre-opening team by the year end or max by January 2012.

Ritz-Carlton is Marriott International's luxury hotel brand which is currently operational in 76 locations across the globe. The hotel has been developed under a special purpose vehicle (SPV) wherein Citi Properties (now Apollo Global Management Ltd) had acquired 74% stake investing to the tune of $100 million back in 2007-8.

Nitesh Estates on its part (26% stake) has already pumped in around Rs85 crore and another Rs30 crore will be invested over the next two quarters to complete the project. The overall cost of developing the property, according to company management is around Rs 680 crore.

Once operational the hotel will also feature a designated retail area housing a host of domestic and international luxury brands.

Among Nitesh’s other hospitality development include another high-end luxury hotel in Chennai which has signed with Ritz-Carlton as well and it will be India's second such branded property when operational. Another hotel property is expected to come up at Kochi for which Nitesh Estates is believed to have approached ITC for a possible association in addition to other hotel management companies.

On the Chennai development, being a chunky one and the overall project cost is likely to be Rs 400-800 crore or more depending on how the entire development evolves. Industry sources however, said that the Chennai land parcel is facing some legal hurdles and hence will take more than expected time to start work.

The Ritz-Carlton, Bangalore will offer several restaurants, extensive meeting and events space, a luxurious spa and outdoor swimming pool, and an entire floor dedicated to high-end retail store boutiques. In addition to spacious rooms and suites, the hotel will include The Ritz-Carlton Club, a private floor accessible only by elevator key and offering light fare and dedicated concierge service throughout the day. 

The Ritz-Carlton Hotel Company, LLC of Chevy Chase, Md., (USA) is an independently operated division of Marriott International, Bethesda, Md.

Vegas casino company Caesars plans to enter India

This story first appeared in DNA Money edition on Wednesday August 17, 2011.

After global hospitality brands, it is the turn of the American casino-gaming companies to make a wager on India.

Caesars Entertainment Corp (CEC), a Las Vegas-based gaming company, has lined up plans to enter entertainment and hospitality sector in India through Caesars Global Life, which it recently set up to develop branded luxury hotels, restaurants and other lifestyle amenities in resort destinations around the world.

Caesars that operates over 50 casinos, hotels, and seven golf courses under several brands is the third casino-gaming company to foray into India after MGM Mirage Hospitality and Thunderbird Resorts Inc.

Neera Chanani, South Asia Head, Caesars Entertainment Hospitality, said the company management sees exciting opportunities across multiple sectors in India. “We are looking forward to partnering with world-class developers,” she said.

Caesars will develop non-gaming presence and build a range of luxury hotels in South Asia with entertainment and retail as integral components, the company said.

According to a company statement, Caesars plans to launch multiple brands from its portfolio in addition to a new lifestyle brand that is under development.

However, it is not clear whether Caesars will take equity positions or focus on management contracts in India.

“Caesars will be focusing on major top-tier cities, as well as resort and holiday destinations,” said the company, which manages properties under the Harrah’s, Caesars and Horseshoe brands, about India plans.

MGM Mirage, the earlier entrant, has already signed two projects with New Delhi-based Blue Coast Hotels for its MGM Grand and Skylofts brands. New York-based Thunderbird’s India foray is in the form of a five-star deluxe hotel/resort in the Union territory of Daman.

Recently, BSE-listed Delta Corp had acquired a controlling stake in Daman Hospitality, which was setting up Thunderbird Resorts to be operational by this year end.

Phoenix renegotiates lease rentals with anchor tenants

This story first appeared in DNA Money edition on Thursday August 18, 2011.

Phoenix Mills Ltd (PML), a Mumbai-based retail centre developer, has achieved a significant success in renegotiating lease rental rates with its anchor tenants at High Street Phoenix (HSP) in Lower Parel.

Close to 150,000 square feet of retail space occupied by brands including Lifestyle, Big Bazaar and Pantaloons has come up for renewal this year. While the new rates for Lifestyle have been firmed up, negotiations for Pantaloons are expected to be completed by November.

Shishir Shrivastava, group CEO and joint managing director, PML, said in an analyst call, “This time the arrangement with Lifestyle for 50,000 sq ft is `91 per square foot (psf), or 7% of revenue share, whichever is higher.”

Big Bazaar has surrendered 16,000 sq ft from the 50,000 sq ft it was occupying at HSP. This surrendered area has now been converted into retail space branded as Grand Galeria Connect and is currently been leased out at an average price of `200- 250 psf.

The balance area with Big Bazaar has also seen an increase in the leasable area owing to loading (re-zoning and re-planning of retail space) being done by the asset owner. With this, the Big Bazaar area has effectively become 39,000 sq ft.

Also, the effective rate for the area occupied by Big Bazaar and GG Connect has now risen to average `134 psf from `68 psf earlier.
About 90% of the GG Connect area has been leased out and stores would start operations by September.

PML said it is identifying the best possible options for the third major anchor client, Pantaloons, whose contract would come up for renegotiations in November.

On the residential side, PML has already launched first phase of residential development in Chennai and is actively working on a
land parcel in Bangalore West.

Delhi HC orders status quo after IRCTC cancels venture with Cox & Kings

This story first appeared in DNA Money edition on Thursday August 18, 2011.

Cox & Kings Ltd (C&K), a travel and tour operator, has moved the Delhi High Court against the Indian Railway Catering and Tourism Corporation Ltd (IRCTC) over the latter’s notice to terminate their joint venture that operates the pan-India super luxury tourist train, Maharajas’ Express.

The equal-stake joint venture, Royale Indian Rail Tours Ltd (RIRTL), was launched in March 2010.

C&K officials declined to comment on the matter as it is sub-judice. However, in a filing with the Bombay Stock Exchange, the company said that the Delhi High Court, in an interim order, has directed IRCTC to maintain status quo on the venture.

The C&K plea had argued that the notice served by IRCTC was illegal as its consent was not obtained before terminating the agreement.

The court has sought a response from IRCTC on the matter and a hearing has been scheduled for today.

C&K officials had earlier said that RIRTL has a long-term lease of 15 years for operating the Maharajas’ Express tourist train in the country.

Banking on the project, C&K said it had invested `30 crore for its stake in the JV and has been aggressively promoting the product in the international markets, especially as high business season starts in October till early 2012. With 23 coaches, the luxury train has a passenger capacity of 84.

The train has four distinct configurations and features five deluxe cars, six junior suite cars, two suite cars and a presidential suite that occupies one entire car.

Itineraries offered by it include the Celestial India Tour, the Classical India Tour and The Princely India Tour.

The cost per journey for various itineraries ranges between $5,600 per person on a twin-sharing basis to $20,000 in a presidential suite.

Tata Global hikes stake in Rising Beverages of the US

This story first appeared in DNA Money edition on Thursday August 11, 2011.

Tata Global Beverages Ltd has increased stake in The Rising Beverages Company LLC through its UK subsidiary.

Rising Beverages is a US-based performance beverage and bottled water manufacturer that sells products under the brand Activate.

Tata Global, the world’s second-largest tea company, had in October last year made a $21 million investment in the US firm for an undisclosed minority stake.

“During the first quarter of the current financial year, our international subsidiary has increased investments in Rising Beverages. Our holding in the company currently stands at 43.1%, calculated on a fully diluted basis. The subsidiary also has an option to further increase the stake in the future,” said Percy Siganporia, managing director, Tata Global Beverages Ltd.

“The incremental investment has been made based on achievement of certain milestones set while making the earlier investment,” Siganporia said.

He did not disclose the details of existing and incremental investments made in the company or comment on the possibility of acquiring a controlling stake going forward.

In another development, Tata Global has discontinued the TiON brand, which the company launched in Chennai sometime in 2009, marking its foray into the cold beverages segment.

“The product did not meet the set matrix envisaged by the management at the time of its launch and hence a decision was taken to drop it from the portfolio of products in the Indian market,” said Siganporia. The brand was pulled out of the market last quarter, he said.

Tata Global’s current offerings in the Indian market include Tata Tea, Tetley and natural mineral water brand Himalayan.
Owing to increased volatility in the commodities market, the company had taken a single-digit hike in one of its products, Tata Tea Premium, towards the end of June. The impact of this price increase, according to the company management, will be seen in the coming quarters.

For the first quarter of this fiscal, Tata Global’s consolidated net profit was up a whopping 253% at Rs161 crore even as consolidated operating income rose just 6% at Rs1,467 crore.

The profit growth was mainly on account of an exceptional gain of Rs89 crore from sale of non-core assets —- sale of investments made in stocks of group and non-group companies.

“The growth in business has been witnessed primarily because of the volumes, while value growth has been very minor at present. However, with the increase in prices in June this year, we will start seeing some value growth happening post second quarter,” said Siganporia.

Asked if the company was looking at introducing any of its international brands in the Indian market, he replied in the negative.

The company’s international portfolio includes brands like Good Earth and Eight O’clock coffee.

Siganporia also did not comment on the status of the company’s joint venture with Pepsi, saying the details would be announced in due course.