Real estate and infrastructure drove buyouts in 2019, says report

In 2019 , buyouts in real estate and infra were $11.6 billion while in other assets it stood at $4.6 billion.

The buyout deals in real estate and infrastructure sectors were 2.5 times of other asset classes, said a new report by audit and consulting firm EY and the Indian Venture Capital & Private Equity Association (IVCA.)

In 2019 , buyouts in real estate and infra were $11.6 billion while in other assets it stood at $4.6 billion. “While consistent growth in buyouts has been a major driver of the overall growth of PE/VC investments for the past three years , there was a slight difference in nature of the deals in 2019. Unlike in 2017 and 2018, where the growth in buyout activities was in traditional PE/VC asset class, 2019 saw growth in infrastructure and real estate asset classes,” it said.

In 2019, 59 per cent of total value of investments in real estate was buyouts, it said. In 2019, investments in real estate went up by 33 per cent at $6.1 billion. “A large portion of them were buyout deals which is a significant divergence from the earlier trend, where a large number of investments in real estate sector were credit investments,” the report said.

According to the report, buyouts in real estate have risen from 0.4 per cent in 2015 to 3.6 per cent in real estate deals.

In 2016, 2017, and most of 2018, large number of investments in real estate were driven by credit platforms funding residential and commercial developments, capitalising on lack of traditional modes of funding for the real estate sector, which was a fallout of the rising bank NPAs and liquidity constraints in NBFC sector.

“However this trend started shifting towards buyouts in 2018 and 2019 with the likes of Blackstone and other large buyout funds lapping up portfolios of premium yield generating assets across commercial, retail, warehousing and industrial real estate segments,” it said.

Moody's lowers Macrotech Developers' rating again, this time to Caa1

The earlier B3 rating was itself a downgrade, by Moody's this August, and indicating hightened credit risk.

Global rating firm Moody's Investors Service has downgraded the corporate family rating (CFR) of Macrotech Developers (earlier known as Lodha) to Caa1, from B3. A rating of Caa1 is given to entities with high credit risk.

The earlier B3 rating was itself a downgrade, by Moody's this August, and indicating hightened credit risk. On Tuesday, Moody's also downgraded the backed senior unsecured rating of the dollar-denominated bonds issued by Lodha Developers International and guaranteed by Macrotech, to Caa1 from B3.

"The downgrade to Caa1 reflects continued uncertainty with respect to the refinancing of Macrotech's upcoming debt maturities," says Sweta Patodia, a Moody's analyst. "While the company has made some progress in its refinancing efforts, its measures to date do not completely alleviate the significant refinancing risks." She is also Moody's lead analyst for Macrotech. MDL now has in place an executed loan agreement for $155 million, secured against the unsold inventory at Lincoln Square, one of its London projects. However, drawdowns under this facility remain subject to receiving the practical completion certificate for all units at the property, expected by next month.

The management estimates that practical completion certificates have come for about 75 per cent of the units in the development, Moody's said.

Macrotech expects to secure another credit facility of around $195 mn against the unsold inventory at Grosvenor Square, its second London project. Documentation for this facility is in progress and likely to be completed over the next few weeks, it said. "These two facilities constitute the company's primary source to refinance the upcoming bonds. However, given that the facilities cannot be drawn down immediately, and remain subject to the fulfilment of certain conditions, liquidity risk remains elevated," says Moody's.

In addition, the company plans to set up a rupee-denominated facility, to be secured against the inventory at its Indian operations.

Business Standard