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JLL to launch another residential fund in strategy flip, eyes REITs for commercial

VC Circle
Swet Sarika
17 July 2014
643 words
Copyright 2014. Mosaic Media Ventures Pvt. Ltd.

JLL scooped up around $27 million for residential properties in its maiden fund early this year.

Jones Lang LaSalle India’s Segregated Funds Group, an investment unit of the realty consultancy firm, is
putting together plans to launch its second residential real estate focused fund targeting a corpus of Rs 400-500
crore ($66-83 million), a top company executive told VCCircle.

The fund is in initial stage of planning and will hit the market early next year to scoop up capital from domestic

Mridul Upreti, chief executive officer, Segregated Funds Group, Jones Lang LaSalle Investment Advisors Pvt.
Ltd, said, “The core strategy of the second fund will be similar to the first one and will seek investments in
projects with smaller development cycle of two and half years.”

It will deploy capital of Rs 25-30 crore towards every project.

However, the new proposed fund would have some key differentiators. It will allocate a good portion of the corpus
for buying out inventory from developers.

“The prices of apartments have bottomed out and this segment looks like a good proposition in the present
scenario. We are yet to reach at a concrete plan but will deploy a combination of debt and equity to back a
mixture of different projects,” said Upreti.

The company expects to give final touch to the plan towards the end of this year. So, it is yet to finalise the
expected IRR and how many projects it want to have in the portfolio. Affordable and student housing feature
among the other preferred segments for the fund.

Recently, Piramal Fund Management launched a new fund christened Indiareit Apartment Fund chasing
purchase of individual residential units, with a target size of Rs 700 crore.

Maiden fund

JLL had hit final close of its maiden fund focused in residential sector investments Residential Opportunities
Fund – I early this year and made its debut investment by putting in Rs 24 crore in a Bangalore project by Assetz
Property Group.

The fund manager is working on three-four deals for properties located in Chennai, Bangalore and Delhi NCR
and aims to seal them by December this year.

“We plan to exhaust the fund by mid-2015,” Upreti said.

In its first outing, the fund could manage to scoop up only Rs 160.75 crore after launching it in 2012 with a target
of Rs 300 crore.

Strategy flip, REIT

The move to launch another residential fund would mark a shift in strategy for JLL after the initial call to look at a
commercial properties focused fund in its second outing.

As reported first by VCCircle, the firm was earlier looking at launching its second fund which was to chase
investments in commercial properties. Separate media reports had later said that the proposed fund would have
a corpus of Rs 600 crore ($100 million) and would be focused on leased commercial properties.

The company has shelved that plan and is now evaluating Real Estate Investment Trust (REIT) to tap into the
commercial space.

“We are closely evaluating the guidelines under REIT and once there is some more clarity, our plan to tap
commercial space through this platform should get concrete in two months. We are waiting for fine print of the
regulation, especially on transfer of properties after investment,” said Upreti.

Although market regulator SEBI had come up with draft norms for launching REITs in India, as an alternative
fundraising channel for real estate sector, the industry was awaiting clarity with respect to taxation. In the Union
Budget announced last week, the government provided tax pass-through status for such investment vehicles
which opens up a new opportunity for the sector. Such vehicles are expected to be more tuned towards
commercial assets.

(Edited by Joby Puthuparampil Johnson)
Mosaic Media Ventures Pvt. Ltd.
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