Piramals to pay around Rs 600 crore to regain control of Crossroads

The Piramal family will soon regain control of the mall in Central Mumbai that provided many in this sprawling megapolis their first experience of shopping outside the neighbourhood corner store.

By Kausik Datta & Kala Vijayraghavan, ET Bureau | Jul 14, 2010, 08.32 AM IST

MUMBAI: The Piramal family will soon regain control of the mall in Central Mumbai that provided many in this sprawling megapolis their first experience of shopping outside the neighbourhood corner store.

A real estate fund owned by Ajay Piramal will buy a majority stake in the company owning the mall, SoBo Central, from the Future Group of Kishore Biyani, the promoter of Pantaloon. Mr Piramal’s fund, Indiareit, is likely to pay around Rs 600 crore to buy the mall, known to most Mumbaikars as Crossroads. Four years ago, Mr Biyani had bought Crossroads from a group named after the late Ashok Piramal , the elder brother of Ajay.

Ajay Piramal, who in May sold the domestic formulations business of his flagship Piramal Healthcare for Rs 13,000 crore to Abbott, will convert the mall into service apartments, said at least three persons close to the matter. Mr Biyani’s Future Group will retain minority ownership.
“The broad contours of the deal have been agreed. But there is a need to free up the space being occupied by the fast food chain McDonalds before signing,” said one of the persons. McDonalds runs a 1,600 square feet outlet in SoBo Central.

Mr Biyani declined to comment on the specifics of the deal. “We are considering and exploring various development plans,” he told ET. Ramesh Jogani, the CEO of Indiareit, also declined to comment. Mr Piramal could not be reached as he was away on vacation.

Indiareit will apply for higher FSI, or floor space index, so that it can build service apartments occupying four lakh square feet in the next three years. SoBo Central has nearly 1,50,000 square feet of area and the FSI—the ratio of total floor area to land size—is 1.33.

Getting permission for higher FSI will pose a regulatory challenge as SoBo Central falls under the Coastal Regulatory Zone (CRZ), said the same person, who did not wish to be named. FSI in CRZ areas is restricted to 1.33.
Real estate price in the Haji Ali area of South Mumbai, where the mall is located, is Rs 40,000-50 ,000 sq ft.

“Prices are expected to go up further by the time the project is ready after three years,” said another person.
Employees, will be transferred to another mall, also called SoBo Central, coming up in Thane, a suburb of Mumbai, after the transaction.

Mr Biyani’s Future Group bought Crossroads in 2006 for Rs 350 crore from the Ashok Piramal group, which launched India’s first full-fledged shopping mall in 1999. An attempt to convert it into office space failed in absence of the requisite permissions.

The Future Group re-developed the property over the next three years with the intention of converting it into a new look mall with a new name, SoBo Central, which claims to house stores selling over 500 national and international brands Indiareit Fund Advisors are promoted by the Ajay Piramal group. Launched in 2006, the fund manages a corpus of $450 million. It owns real estate projects in Mumbai, Chennai, Bangalore, Hyderabad and Pune.

In May, the Piramal group sold the domestic formulations business of Piramal Healthcare to the US-based Abbott Laboratories for a down payment of $2.12 billion and annual installments over four years taking the total deal size to $3.72 billion.

At the sale announcement conference, Mr Piramal had said the company would reward the shareholders with a special dividend. The Piramal group owns 49% in the drug firm.

Although he did not disclose the size of the dividend, the stock market participants speculate that it would be over Rs 3,000 crore. The Piramal group will invest a large chunk of the money which it would get as special dividend in the realty sector, they added.

BACK IN SADDLE

Mr Biyani’s Future Group bought Crossroads in 2006 for Rs 350 crore from the Ashok Piramal group A real estate fund owned by Ajay Piramal will buy a majority stake in the company owning the mall Ajay Piramal, who sold the formulations biz of Piramal for Rs 13k cr, will convert the mall into service apartments

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