Unitech, the country’s second-largest listed real estate company, has put on the block all its six hotel projects under construction to reduce its capital expenditure and raise cash to fund its other ongoing projects. The company is in talks with a few private equity investors to sell all its six properties, being constructed at Gurgaon and Kolkata.
“We are looking at divesting up to 100% stake in all six properties, comprising 1,000 rooms. We are also talking to a few private equity funds for this, but a deal hasn’t been clinched yet,” a top executive at Unitech’s hospitality arm told ET. He said the company had also scaled down its target for hotel business. Instead of 15 hotels with 2,500 rooms as planned earlier, Unitech has decided not to go beyond the 1,000-room capacity.
“We are proceeding with our hotel business as planned earlier. Six of our hotels are under construction. The first will open in January 2009. Unitech is in the business of developing properties and looking at monetizing its real estate assets. We are evaluating a divestment of equity at both individual assets as well as a group of assets. Depending on the price, we will be looking at minority or majority or outright sale in these assets,” Unitech MD Sanjay Chandra said.
Unitech’s first hotel project will be the 199-room mid-market property, which will be managed by Marriott and sport the ‘Courtyard’ brand. A person briefed on the matter said that Unitech was seeking a valuation of Rs 250 crore-Rs 300 crore for the property, but had been offered a lower Rs 200 crore by a private equity investor. He said the two parties may close the deal soon at the lower end of the band.
Other two hotels of Unitech, for which the company has management tie-ups with Marriott and Carlson hospital chains, will be ready in one-and-a-half years.
Mr Chandra had said that Unitech planned to build 35 hotels, including 15 in the first phase. The company expected to raise $350 million through private equity in the current fiscal for its hotel business. The global financial turmoil, however, has made fund-raising difficult for real estate firms.
With equity as well as debt becoming increasingly difficult to raise, a capital-intensive business like hospitality has taken a backseat for developers. Even DLF has shifted its focus from hotel and mall business to other segments where revenue realization is quicker and easier.