Brookfield buys key Leela hotel assets for Rs 3950 crore

Canadian alternative asset management company Brookfield has bought the assets of Hotel Leelaventure comprising key hotel properties in Delhi, Bangalore, Udaipur and Chennai for Rs 3950 crore.

ET was the first to report in its edition dated September 3 that Brookfield was in talks with lender JMFARC (JMFARC) for Hotel Leelaventure.

In a Monday evening release to the stock exchange, Leelaventure said the company’s hotel business together with all the assets and liabilities of hotels located in Bangalore, Chennai, Delhi and Udaipur were being acquired by Brookfield on a slump sale basis.

The company also conveyed that the promoters and their affiliates would be entitled to a consideration of Rs. 300 crore from Brookfield on account of any intellectual property held by them that pertains to the assets that are being sold and also for certain business expansion services that the promoters have agreed to provide the investor.

Leelaventure, which has debt exceeding Rs 3000 crore, notified shareholders that all borrowings of the company from banks and financial institutions would stand repaid after the completion of the transaction and lenders dues would be retired. The company will continue to operate the hotel in Mumbai and hold land in Hyderabad and operate the joint development project of residential apartments with Prestige Developers in Bangalore. Brookfield will have a right of first refusal over the company’s hotel in Mumbai as a part of the transaction, implying it will have the right to match the highest offer for the property in the eventuality of its sale at a later stage.

The promoters who own the Leela brand would be transferring the Leela brand to Brookfield for all hospitality businesses.

Leelaventure said the company’s shareholding will remain unaffected following the sale. As of December 2018, the promoters held a 47% stake in the company out of which 94% was pledged to lenders. Leelaventure said besides the four assets the transaction also includes transfer and assignment of all of the company’s contracts for the operation and management of hotels together with contracts for the provision of amenity services in serviced apartments, as well as 100% shareholding of the company in subsidiary Leela Palaces and Resorts which owns the property and license for the development of a hotel in Agra.

Vivek Nair, chairman and managing director of Hotel Leelaventure said he is confident that the brand will receive a boost and be further strengthened and continue to be known for its world-class services.

Ankur Gupta, managing director and head-India real estate at Brookfield Asset Management said he looked forward to completing this transaction at the earliest, while ensuring that all operations remain unaffected. “We expect the Leela hotels to continue to be market leaders.”

During financial year 2017-2018, the sold hotel undertakings contributed Rs 591 crore (80% of the total income) to the company’s total income of Rs 743 crore.

The hotel assets contributed about 88% to the total net worth of the company.

Brookfield Asset Management globally owns and operates $350 billion worth of assets with interests in various sectors.

Earlier, a consortium of investors including Blackrock, SSG Capital and RB Capital had also been in the fray for acquiring the hotel chain.

In 2014, Leela’s lenders with exposure of 95.6% of the debt had transferred the loans to JMFARC. One lender, which accounted for about 1% of the debt, assigned that to Phoenix ARC.

In June last year, Hotel Leelaventure’s board had approved the enabling provision to issue up to 125 crore equity shares in one or more tranches to JMFARC, which currently holds most of its debt. The potential share issue could have hiked the ARC’s stake in Leelaventure to 75% from the current 26% but the proposal was not approved during the company’s annual general meeting held on August 20.

Source:-https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/brookfield-buys-key-leela-hotel-assets-for-rs-3950-crore/articleshow/68468458.cms