March 19– Mar. 19–MUMBAI — Canada's Brookfield Asset Management has agreed to acquire four hotels and a land parcel from India's Hotel Leelaventure Ltd for INR3,950 crore, in what would be the largest-ever hotel deal by value in India. The deal culminates more than a year of talks between Brookfield and various stakeholders of debt-laden Hotel Leelaventure, which has been in the middle of financial restructuring.
The board of Hotel Leelaventure approved on Monday the sale and transfer of four of its hotel properties to an affiliate of BSREP III, Brookfield's latest real estate fund.
The luxury hotel chain owns five hotels, comprising more than 1,400 rooms, in New Delhi, Bengaluru, Chennai, Mumbai and Udaipur. The deal will exclude the hotel in Mumbai while including the land parcel in Agra.
The Brookfield-Leela deal will also entail buying the Leela brand, existing and all upcoming management contracts of Hotel Leelaventure and also absorbing the employees of the four hotels, the two companies said in a joint statement.
"The Leela is one of the finest hospitality groups in India and over the years it has gained extraordinary recognition from some of the most prestigious authorities on travel and luxury in the world. We are excited with this opportunity and look forward to completing this transaction at the earliest, while ensuring that all operations remain unaffected," said Ankur Gupta, managing director and head-India Real Estate, Brookfield Asset Management.
The previous largest hotel sale was in 2014 when DLF Ltd sold Aman Resorts to Aman Resorts Group Ltd (ARGL) for INR2,250 crore.
On 17 December, Mint reported that Brookfield is close to buying four of the hotel assets and a large land parcel owned by Hotel Leelaventure.
The deal is subject to approvals from shareholders, lenders and other regulatory and statutory approvals, according to the statement.
Hotel Leelaventure will continue to run its hotel in Mumbai and own certain pieces of land in Hyderabad as well as a joint development project of residential apartments with Bengaluru-based Prestige Developers.
"Brookfield will have a right of first refusal over the company's hotel in Mumbai, as a part of the transaction," according to the statement.
JM Financial Ltd was the exclusive financial adviser to the deal.
The hotel company, set up by C.P. Krishnan Nair in 1986, had been looking to pare debt by selling its hotels as well as some of its non-core assets including land parcels. At the end of last financial year, the company's debt stood at around INR3,799 crore. In 2015, Hotel Leelaventure sold its hotel in Goa to a Malaysian investment firm for INR725 crore. The company had also put its Chennai and Delhi properties on the block but failed to find a buyer.
Following failure of a debt restructuring plan, the Mumbai-based company transferred its loans from 14 creditors to JM Financial Asset Restructuring Company (JMARC) in 2014.
In September 2017, Hotel Leelaventure allotted more than 160 million shares worth about INR275 crore to JMARC on conversion of debt to equity. JMARC owns 26% in Hotel Leelaventure. The bulk of the proceeds from the transaction is expected to used to repay its lenders.
The announcement of the Brookfield-Leela deal follows the filing of an insolvency petition by JMARC on 26 February against the hotel chain at the National Company Law Tribunal (NCLT) in Mumbai.
For Brookfield, the hospitality deal follows its investments in commercial office, residential assets and infrastructure projects in India. Since its first buyout of Unitech Corporate Parks in 2013, Brookfield has grown aggressively, building and managing nearly 25 million sq. ft of commercial real estate. It has signed some of the biggest real estate deals in India, including acquiring Hiranandani group's commercial offices for INR6,700 crore and Essar group's Equinox commercial complex for INR2,400 crore.
Hotel Leelaventure, which posted a total income of INR743 crore during the financial year ended 31 March 2018, at one time competed with the likes of Indian Hotel Company Ltd's Taj Hotels and EIH Ltd's Oberoi hotels.
"The Leela is rated amongst the top hospitality brands in the world and I am confident that the brand will receive a boost and be further strengthened and continue to be known for its world-class services," said Vivek Nair, chairman and managing director, Hotel Leelaventure.
