INRnews - Indian Real Estate & Property News

Highlights:

• Total market value of portfolio increased to £1,037.0 million, compared to   £553.0 million as at 31 March 2007 (£481.5 million at Admission).

• UCP's ownership of 60% of these projects is therefore valued at £622.2 million compared to £331.8 million as at 31 March 2007 (£288.9 million at the time of Admission), an increase of 87.4% from March 2007 and 115.4% since Admission.

• These valuations have been achieved on the back of good progress on developments, achieving rents above budget, excellent leasing, good quality of construction and cap rate compression.

• Adjusted NAV* grew 46.6%.to £1.9020 per share (£1.2974 per share as at 31 March 2007).

• NAV was £1.6018 per share against £1.0184 per share at 31 March 2007 and £0.9626 per share at the time of Admission, representing a rise of 57.3% and 66.4% respectively.

• Outlook for the Indian commercial real estate market remains robust, with a constrained supply of quality commercial and retail space outweighing strong demand, and driven by India's continuing economic growth.

• Excellent progress continues to be made in the construction and letting of the seed portfolio assets in the National Capital Region.

Proposed corporate transaction:

• As announced separately today, Shareholder approval is being sought to approve a potential exit route for three of the Company's six seed portfolio assets, via a conditional sale to a Singapore listed REIT-type structure.  The £234.1 million minimum consideration for the assets would deliver an average IRR across the projects of 38.9 % (assuming sale takes place on 1 March 2008), in excess of the target IRR set out at the time of the IPO and delivered in a compressed timeframe.

• It is intended that the proceeds of the disposal will be reinvested into Indian real estate development projects in due course

• The Company is also seeking Shareholder approval to widen UCP's investment mandate to include the retail, other commercial and hospitality sectors, where the Directors and the Investment Manager believe there is a good opportunity to create shareholder value.

Mr Atul Kapur, Chairman of Unitech Corporate Parks, commented;

"Our results reflect the strength of our business strategy and re-affirm the quality of our assets and our team.

"Prospects for the Indian real estate market continue to remain strong, especially for high-quality, secure and well located assets such as those in our portfolio.  Robust demand for quality commercial, residential, hospitality and retail space driven by India's continuing economic growth, and a constrained quality supply in the midst of escalating demand, provide support for our broadened investment strategy of developing commercial space and retail space to satisfy the increasing demand.

"With the initial investments in the National Capital Region and Kolkata projects, UCP has made significant progress toward its goal of capitalizing on the diverse  and growing Indian real estate market through the development of commercial space.   Additionally, the Company continues to explore strategic funding options to further  enhance project and shareholder returns and is therefore looking at other  IT / ITES space in the regions of India to include in the portfolio.

"We remain committed to the realisation of investments in a manner which maximises both returns to the Company and subsequent shareholder value.  The proposed sale  of three of our assets to a Singapore listed REIT-type structure is a clear  demonstration of our ability to create opportunities where we can deliver returns  above those originally targeted and in a compressed timeframe.

"Given the timely investments in the projects, solid marketing initiatives, assembly of a world-class delivery team and progress on the pipeline projects, I believe UCP has established a strong base, with excellent momentum to achieve
targeted returns.  The increased valuations bear testimony to this."

UCP was formed to invest in Indian commercial real estate, targeting the real estate  requirements of the high growth Indian IT and IT Enabled Services ("ITES") sectors.  The Company is focused on investment in Special Economic Zones ("SEZs") dedicated to  the IT and ITES industries or IT Parks which are suitable for foreign direct investment.

Seed Portfolio Assets

The Company has co-invested with Unitech Ltd ("Unitech"), one of India's leading real estate companies, and its affiliates in the Seed Portfolio Assets, with the Company acquiring majority control and Unitech holding,  either directly or indirectly, a minority stake.  All of the Seed Portfolio Assets  are being developed by Unitech.

Of these, five assets are located in the National Capital Region (the area surrounding Delhi, Northern India) and account for approximately 80% of UCP's potential leaseable area when completed.  The sixth asset is situated in the Kolkata area of the State of West Bengal, accounting for the remaining 20%.

Unitech, through its right of first refusal agreement with UCP, intends to bring more assets into the portfolio and also intends to diversify the portfolio mix both in terms of business segments and geographic locations.

An update on the Company's six assets is as follows:

Infospace Gurgaon (G1-ITC)

G1-ITC comprises a land area of 24.7 acres and will have a total leasable area of approximately 3.26 million sq ft upon completion, consisting of office space of 3.21 million sq ft and retail space of 50,000 sq ft. The project will be developed  as an IT and ITES SEZ. The site is located in the Gurgaon area of the National  Capital Region and is being designed by Callison Architecture Inc.

The buildings will include recreational facilities such as food court, a gymnasium  and coffee shops. G1-ITC will form part of Uniworld Resorts, a proposed 210 acre  premium integrated township being developed by Unitech which will also contain  premium villas, high rise apartments, a proposed golf-course and other facilities,  providing an integrated live and work environment.

To date, G1 has not entered into any Commitment Leases. The first phase of G1, comprising approx. 1.1 million sq ft of lettable area, is expected to be completed by May 2010.

Completed Lettable Area ("LA") and LA to be completed:

                                      Total estimated
G1-ITC Phases     Expected         construction costs(2)     Estimated LA 
                completion(1)   (Rs. million) (£ million)       (sq ft)
Phase 1           May 2010         2,565.5       31.47         1,087,912
Phase 2           Feb 2011         2,660.8       32.64         1,087,912
Phase 3           Nov 2011         2,760.4       33.86         1,087,912
Total                                     7,986.7       97.97         3,263,736

Notes:

(1)    For each Phase, the construction period from start to completion is approximately 24 months.
(2)    Includes fit-outs and excludes interest during construction.

InfoSpace, Dundahera, Gurgaon ("G2-IST")

G2-IST is a 27.7 acre site located in Dundahera, Gurgaon, on the Old Gurgaon Highway  and near to the Delhi-Gurgaon border. The completed project is designed to have a  total LA of approximately 3.7 million sq ft consisting of approximately 3.6 million  sq ft of office space and approximately 50,000 sq ft of retail space. 25% of the total  LA is expected to be leased with fit-outs. The buildings, designed by Callison  Architecture, Inc., will be finished to a high standard with use of granite and  glazing. It is proposed that the buildings will contain high efficiency floor  plates and triple level basements for car parking and services. The project complex  is also expected to include recreational facilities such as a food court, a gymnasium  and coffee shops.

It is being developed by Unitech Developers and Projects Limited (''UDPL'') as an IT/ITES SEZ. UDPL is developing G2-IST pursuant to a joint development agreement  with an independent third party, Gurgaon InfoSpace Limited (''GIL''). In consideration  for development of the project at G2-IST, UDPL is entitled to 72 per cent. of the  gross sale receipts or deposits from the purchasers and/or tenants, as the case  may be, arising out of the sale or lease of the developed
areas of G2-IST and GIL i s entitled to 28 per cent. UDPL has agreed to incur 100% of base construction and d evelopment costs, whereas the fit-out costs will be shared between UDPL and GIL in  the proportions of 72 per cent and 28 per
cent respectively.

As at 1 December 2007, the Completed LA for G2-IST (comprising Phase 1) amounts to 462,399 sq ft and the LA to be completed (relating to Phases 2 - 6) is 3,187,601 sq ft.

G2-IST has letters of intent and binding leases (collectively "committed leases")  for approximately 733,370 sq ft of lettable area, reflecting a committed occupancy  rate of 100% for Phase 1 and amounting to approximately 20% of the aggregate estimated  LA for G2-IST when fully completed. The tenant profile of G2-IST represented by the  Committed Leases is diverse and represents a wide variety of industry sub-sectors  in the IT and ITES segments. The standard lease term of G2-IST's tenants for the  Committed Leases is for a period of five years with a lock-in for three or five  years during which the tenants are not entitled to terminate the leases. At the  end of the lease term, there is an option to renew the lease term. The rental is  fixed during the lease term, and upon renewal at the end of the lease term the rental  has a
step-up which is subject to mutual consent. There is a standard escalation in lease rentals of 15.0% after three years.

This is one of the three investments which the Directors are proposing to sell to  the Singapore listed REIT-type structure mentioned previously.

Completed LA and LA to be completed:

                                      Total estimated
G2 1ST Phases      Expected         construction costs(2)        Estimated LA 
                 completion(1)  (Rs. million)(£ million)             (sq ft)      
Phase 1        November 2007           809.2       9.93              462,399
Phase 2             May 2008           1,236.4      15.17              630,000
Phase 3         October 2008          1,197.0      14.68              600,000
Phase 4           March 2010           1,179.8      14.47              600,000
Phase 5             May 2010           1,288.8      15.81              650,000
Phase 6            July 2010            1,414.5      17.35              707,601
Total                                          7125.7      87.41            3,650,000

Notes:

(1) For each Phase, the construction period from start to completion is approximately 21 months.
(2) Includes fit-outs and excludes interest during construction.

InfoSpace, Sector 62, Noida ("N1")

N1 is a 19.3 acre site located close to National Highway 24 in Noida and is being developed by Shantiniketan Properties Limited as an IT Park. The completed project at N1 is expected to provide an estimated 2.1 million sq ft of LA surrounded by a landscaped common area. All the buildings are designed to have excellent visibility from the main road approaching the site. The buildings have been designed by Callison Architecture, Inc. with high efficiency floor plates and a basement for car parking and services. The complex is designed to provide approximately 2.0 million sq ft of office space and approximately 60,000 sq ft of retail space and is expected to include facilities such as a food court, a gymnasium, coffee shops and other amenities.

To date N1 has not entered into any Commitment Leases. The first phase of N1, comprising approx. 270,000 sq ft of LA, is expected to be completed by July 2008.

This is the second of the three investments which the Directors are proposing to sell to the Singapore listed REIT-type structure mentioned previously.

Completed LA and LA to be completed:

                                     Total estimated
N1 Phases       Expected          construction costs(2)      Estimated LA 
              completion(1) (Rs. million) (£ million)           (sq ft)
Phase 1        July 2008              541.3       6.64            270,000
Phase 2      August 2008            764.9       9.38            380,000
Phase 3   September 2008          721.6       8.85            357,000
Phase 4      August 2009             579.1       7.10            274,000
Phase 5   September 2009          925.4      11.35            436,000
Phase 6     October 2009            739.5       9.07            347,000
Total                                     4,271.8      54.39          2,064,000

Notes:

(1)   For each Phase, the construction period from start to completion is approximately 21 months.
(2)   Includes fit-outs and excludes interest during construction.

InfoSpace, Sector 135, Noida ("N2")

N2 is a proposed IT/ITES SEZ located in Noida with an approximate total project area of 29.7 acres. The estimated LA at completion will be approximately 3.17 million sq ft consisting of approximately 3.14 million sq ft of office space and  approximately 30,000 sq ft of retail space. The buildings are to be designed by Uppal Ghosh Associates and will include recreational facilities such as food courts, a gymnasium and coffee shops. N2 is near Unitech's proposed Express City development, a prime residential project consisting of premium villas, multi-storied apartments, a proposed golf course and other facilities. Four other residential projects have been completed in land adjacent to N2.

To date N2 has not entered into any Commitment Leases. The first Phase of N2, comprising approx. 300,000 sq ft of LA, is expected to be completed by August 2009.

Completed LA and LA to be completed:
                                             Total estimated
N2 Phases       Expected                construction costs(2)  Estimated LA
              completion(1)    (Rs. million)      (£ million)        (sq ft)
Phase 1         Aug 2009            1,997.2            24.50        903.042
Phase 2         Feb 2010            1,957.0            24.01        863,607
Phase 3         Aug 2010            2,005.7            24.60        863,607
Phase 4         Feb 2011            1,283.2            15.74        539,283
Total                                      7,243.1            88.85      3,169,539

Notes:

(1)   For each Phase, the construction period from start to completion is approximately 24 months.
(2)   Includes fit-outs and excludes interest during construction.

InfoSpace, Greater Noida ("N3")

N3 is a proposed IT/ITES SEZ in Greater Noida with an approximate total project area of 50.0 acres. The estimated LA at completion will be approximately 4.95 million sq ft consisting of approximately 4.85 million sq ft of office space and approximately 100,000 sq ft of retail space. The buildings are to be designed by Hellmuth, Obata and Kassabamm, Inc. and will include recreational facilities such as a food court, a gymnasium and coffee shops. N3 is located in Greater Noida Technical Zone which comprises 12 land parcels of varying sizes for IT Parks (from which a number of companies may operate) and campus developments (which are generally owned and occupied by a single company).

To date N3 has not entered into any Commitment Leases. The first phase of N3, comprising approx. 1.65 million sq ft of LA, is expected to be completed by March 2011.

The results and inquiries for space are very encouraging, as they demonstrate strong demand for high quality newly developed product in the NCR and Kolkata region.

Completed LA and LA to be completed:

                                      Total estimated
N3 Phases     Expected           construction costs(2)  Estimated LA
            completion(1) (Rs. million)    (£ million)        (sq ft)
Phase 1       Mar 2011         3,123.7          38.32      1,649,018
Phase 2       Sep 2011         3,201.1          39.27      1,649,018
Phase 3       Mar 2012         3,279.9          40.23      1,649,018
Total                                 9,604.7         117.82      4,947,054

Notes:

(1)   For each Phase, the construction period from start to completion is approximately 36 months.
(2)   Includes fit-outs and excludes interest during construction.

Infospace, Kolkata ("K1")

K1 is being developed by Unitech Hi-Tech Structures on a 45.4 acre land parcel as an IT/ITES SEZ. Designed by RMJM Singapore Pte. Ltd., the complex will have an estimated total LA of 4.4 million sq ft upon completion. The site is designed to provide an estimated 4.3 million sq ft of office space and an estimated 100,000 sq ft of retail space and is expected to include amenities such as food courts, coffee shops and a gymnasium. 25% of the total lettable area is expected to be
leased with fit-outs.

As at 1 December 2007, the Completed LA for K1 amounts to approx. 300,000 sq ft and the LA to be completed is approx. 4,057,000 sq ft.

As of that date, K1 has letters of intent and binding leases (collectively "committed leases") for approximately 957,553 sq ft, amounting to approximately 22% of the aggregate estimate LA for K1 when fully completed. The standard lease term for K1's tenants for the Committed Leases are for terms of five to six years with a lock-in for two to five years during which the tenants are not entitled to terminate the leases. The rent is fixed during the lease term, and upon renewal at the end of the lease term the rental has a step-up which is subject to mutual consent. There is a standard escalation in lease rentals of 15.0-18.0% after three to four years. The Committed Leases are for an initial term of five to six years.

This is third of the three investments which the Directors are proposing to sell to the Singapore listed REIT-type structure mentioned previously.

Completed LA and LA to be completed:
                                            Total estimated
K1 Phases         Expected             construction costs(2)        Estimated LA
               completion      (Rs. million)     (£ million)              (sq ft)
Phase 1         March 2008      1,982.3               24.32              797,650
Phase 2         March 2009      1,767.9               21.69              700,000
Phase 3.1         May 2009        549.6                6.74              242,901
Phase 3.2    February 2010        514.5                6.31              240,835
Phase 3.3    November 2010        525.7                6.45              237,223
Phase 4      February 2010      2,723.5               33.41            1,100,000
Phase 5       October 2010      2,597.8               31.87            1,032,370
Total                                  10,661.3              130.79            4,350,979

Notes:

(1)   For each Phase, the construction period from start to completion is approximately 28 months.
(2)   Includes fit-outs and excludes interest during construction.

Outlook

Prospects for the Indian real estate market continue to remain strong, especially for high-quality, secure and well located assets such as those in your Company's portfolio. 

Robust demand for quality commercial, residential, hospitality and retail space driven by India's continuing economic growth, and a constrained quality supply in the midst of escalating demand, provide support for our broadened investment strategy of developing commercial space and retail space to satisfy the increasing demand.

As evidenced by the recent successful IPO of an Indian commercial property portfolio, listed on the Singapore Stock Exchange, we believe that currently there is strong investor appetite for high quality real estate assets such as those in your Company's portfolio. With this in mind, the Company is at an advanced stage in proposing to exit part of the portfolio of seed assets through a Singapore REIT-type structure.  This was one of the potential exit routes set out in the Company's Admission Document.

With the initial investments in the NCR and Kolkata projects, UCP has made significant progress toward its goal of capitalizing on the diverse and growing Indian real estate market through the development of commercial and retail space.  Additionally, the Company continues to explore strategic funding options to further enhance project and shareholder returns, and is therefore looking at other IT/ITES space in the regions of India to include in the portfolio.

Given the timely investments in the projects, solid marketing initiatives, assembly of a world-class delivery team and progress on the pipeline projects, I believe UCP has established a strong base, with excellent momentum to achieve targeted returns. The increased valuations bear testimony to this.