Brookfield takes over Peninsula Land’s project: Distress sale or strategic exit

In a recent development, global alternative investment manager Brookfield Asset Management has taken over realty developer Peninsula Land’s equity stake in its premium project Salsette 27 in Mumbai’s Byculla locality. As stated in an exchange filing by Peninsula Land Management, this transaction has resulted in reduction of the company's debt obligations to Brookfield by Rs.5.39 billion. The filing further stated that the remaining non-convertible debentures (NCDs) of  Rs.200 million will be repaid to Brookfield from the proceeds of another completed project of the company over the next 18 months. 

As far as this debt repayment is considered, in 2016, Brookfield had invested  Rs.4.50 billion in the project through NCDs, marking its first investment in Indian residential real estate. As a result, the developer’s (Peninsula Land) total debt obligation towards the same stood at  Rs.5.59 billion. This is bifurcated as the principal amount standing at `4.50 billion and accrued interest of Rs.1.09 billion.

Naturally, the asset being taken over by Brookfield reduces the debt burden of Peninsula. To put figures in perspective, the company’s debt currently stands around `14 billion.The company is reportedly planning to further reduce the debt through sale and monetisation of its investments.

The filing also stated that with this transaction the Ashok Piramal Group Company has met its obligations to Brookfield and has separately entered into a service agreement to continue developing and selling the said project for the SPV Goodtime Real Estate.

Amid theCOVID-19 pandemic, the luxury real estate segment is getting significantly affected with buying decisions getting delayed or avoided. Thus, Peninsula Land being able to get liquidity in uncertain times to meet its debt obligation is a positive step. 

In 2019, Brookfield surpassed Blackstone to become the largest private investor in India, investing $6.28 billion as against $2.38 billion by Blackstone. Further, Brookfield is reportedly planning a REIT in the near future and consolidating its position.