Hotel industry in Goa as well as India going through a bad phase due to the increase in number of hotels and drop in overall business, In the recent past there are many advertisements appearing on social media and property sites claiming the sale of some well known resorts in North and South Goa. One such well known hotel, which is now available for sale, is the South Goa based Leela Hotels & Resorts. According to news, Leela Ventures has two properties based in south of India made available for sale to cut down the debt. One of the properties situated in Goa and second is in Chennai.
Total 5 top global firms are in fray, while the exact size of the deal is yet to be ascertained, the Chennai property is valued at around Rs.1,300 crore and the one at Goa is valued at Rs.200-300 crore. “The deal may end by the December 2015”, disclosed the sources. According to the news published in the LIVEMINT “At least five top international private equity firms, family offices and endowment funds are in the race to buy hospitality group Hotel Leelaventure Ltd’s five-star hotels in Goa and Chennai. Two persons, including one who is directly familiar with the negotiations, confirmed this, adding that the sale of the two properties is likely to be completed before Christmas”.
The Leela Ventures Hotel which is presently under the control of JM Financial Group’s asset reconstruction firm JM Financial Asset Reconstruction Co. Pvt. Ltd. has been approached by the large private equity investors like Blackstone Group and Brookfield Asset Management, along with a few family offices and international endowment funds from the US, Europe, West Asia and Singapore. Some of them have shown the interest in buying both the Leela hotels. “The Chennai and Goa five-star hotels are two of the finest properties of The Leela Group. Many investors have shown keenness in the two properties. Five of them have been shortlisted. While some buyers intend to completely buy out one of the two hotels, other players are interested in buying majority stakes in both the properties. The deal is in the final stages and is likely to be closed by December,” Said the sources.
The Leela Ventures Hotels
Leela Goa, the property was built in 1991 consisting of 206 rooms across the 50 acres of land at Cavelossim on Mobor beach in south Goa. It is supposed to be one of the best performing hotels of the group. The Leela at Chennai was opened in September 2012. The hotel, with 326 guest rooms, is built on 4.8 acres of land. There is no confirmation about the exact size of the deal but according to the available sources, Goa property is going for 300 CR while the Chennai is property is valued at whooping 1300 CR
The JM Financial have denied commenting on the deal saying that “As a policy, we do not comment on speculation.” While The Blackstone tuned to the similar band saying that “As a matter of policy, Blackstone does not comment on media/market speculation.”
According to the sources both the hotels have been taken over by the JM Financial Asset Reconstruction Co. in July 2014 from a consortium of banks led by State Bank of India after the lenders restructured Hotel Leela Venture’s debt which was taken for construction of the two hotels under the corporate debt restructuring (CDR) mechanism. “Post the purchase of loans against Leela properties from the banks last year, JM Financial Asset Reconstruction Co. got two board positions in the company. Over the past year, costs of running the hotels have been brought under control to optimize the performance of the hotels and improve margins. Even after the sell-off of the two hotels, the current management at the two Leela hotels is likely to be retained; the way the existing team works will continue and the Leela brand too will be retained,” said the sources.
According to the available information a senior hospitality consultant, requesting anonymity, said Hotel Leela Venture is desperate to reduce its debt burden and a divestment will create a positive impact on the hospitality and banking sector as a whole as the company features at the top of the list of indebted hospitality firms. “However, the Leela brand is strong and robust. The international investors would want to retain the Leela brand post sale,” the consultant, who advises several hotel groups, said.
The Leela Ventures having their headquarters in Mumbai presently owns and manages eight properties in the prime urban areas across India as a holiday destinations which includes the Mumbai, Delhi, Gurgaon, Bangaluru, Udaipur, Kovalam, Chennai & Goa. There are new properties which are under developments which include Jaipur, Agra, Lucknow and Kathmandu.
The plans of the sale of the Goa and Chennai based properties of Leela Ventures came into picture in the month of March 2014 when they decided to cut the debt of the company by divesting selected properties and continue managing operating the new hotels. According to the sources JM Financial Asset Reconstruction paid around Rs. 865 crore to the lenders to buy number of properties belonging to Leela Ventures across India which included Goa and Chennai properties. Apparently JM paid around 20% of the total value, for loans to Leela Hotels. The transaction helped the consortium of banks to sell 98% (Rs. 4100 Crore out of overall dues of Rs. 4200 crore) of exposure to Leela Ventures. As per the CDR terms, the company had to reduce its debt through sale of assets. Troubled loans are usually referred to the CDR cell of lenders after a majority of them approve a recast, which could entail a lower interest rate, a longer repayment period, or the conversion of overdue interest into loan principal. In 2011, Hotel Leelaventure sold off its luxury hotel Leela Kovalam in Kerala for Rs.500 crore to Travancore Enterprises. In 2013, it sold its IT Park Building in Chennai for Rs.170.17 crore to Reliance Industries.
When Goa Prism tried to get in touch with officials at Leela Goa they denied commenting on the issue saying that they are not authorized to reveal any details pertaining to it directing us to their marketing head at corporate office in Mumbai. When Goa Prism called the Marketing Head Shobha Patel she was bit reluctant to comment on it saying that though she is handling the marketing for the group but she is not aware of any such deal, getting in touch with the G M over the mobile was in vain as he has been travelling abroad in connection with some deal which nobody is aware of.
Source: Various Sources
Edited by: Goa Prism News Desk