News: Moving beyond malls - Piramal looks at realty options

(BS 04/08/2006) Mumbai - The group plans to expand into western India with projects in Goa, Pune and Nagpur.

Having exited the country’s first mega mall — Crossroads — Rajeev Piramal, managing director of Peninsula Land Management, is looking at creating footprints outside the city.

Rajeev, who took over Ashok Piramal group’s real estate buisness after the recent restructuring of the Piramal group businesses, plans to expand into western India with projects in Goa, Pune and Nagpur, over the next 24 months.

In Goa, the group has received permission to develop three special economic zones — two for bio-tech and one for the gems and jewellery industry. It has completed the process of acquiring 300 acres for the projects and is now getting government clearance.

It is also developing hi-end villas in the state. Piramal is looking at moving into IT parks and commercial office spaces.

At present, the company is building an 800,000 sq ft IT park, just off Mumbai’s prime business district of Bandra-Kurla complex. This property is expected to be ready within the next 24 months. The company owns the landmark 1 million-sq-ft Peninsula Corporate Park in Mumbai’s mill area.

The other area where the company is scouting for opportunities is townships. “We are looking at developing townships in western India, on the outskirts of Mumbai, Pune and Nagpur,” says Piramal.

He is also mulling opportunities in residential segments at all these locations. “We are primarily known as a Mumbai mall developer but we want to change that and go out into other cities and areas also,” he adds.

His company recently completed a low-cost housing scheme for the Mumbai Metropolitan Regional Development Authority. However, Piramal says the company will continue to focus on retail properties in the future and has retained the Crosssroads brand. “The townships will have a retail component and all of them will be called Crossroads.”

The company sold its flagship retail property, the 1.2 lakh sq ft Crossroads in central Mumbai, to Kishore Biyani’s Futures Group (formerly Pantaloon) a couple of months ago. Piramal clarified that contrary to market reports the mall was sold for around Rs 250 crore.

When the deal was struck, reports had been circulating that the sale price was in the region of Rs 350-400 crore. Piramal said, “The mall had had its first run and we had the option of either reinventing it completely or exiting altogether. It made commercial sense to exit, although it was a difficult decision emotionally.”

Lease rentals in the mall had been falling for some time — from a high of Rs 420 per sq ft during its hey days, to around Rs 220 per sq ft — especially as newer properties came up in the area. Biyani, on the other hand, had reportedly been looking for a mall in central Mumbai for his “seamless mall” concept, to be manifest in Central.

According to market sources, Crossroads, for which the bulk of leases will expire by the end of the year, will be revamped into Mumbai Central.

Piramal continues to own around 4,000-5,000 sq ft of the CR2 Mall (Crossroads 2) at Nariman point. Much of CR2 was sold out when Inox bought space for its mulitplex. This was followed by luxury brands like Swarovski buying out spaces.