ASK Real Estate Special Opportunity Fund – IV

Fund Snapshot

Investment Strategy

• Investments in Top six cities (Mumbai – MMR, NCR, Bengaluru, Chennai, Pune & Hyderabad)
• Focus on job/ growth corridors
• Investments in affordable & mid-segment residential, commercial and mixed-use developments
• Sustainable developments goals
• Investments in preferred returns
• Control investments with a defined risk management framework
• Conservative underwriting approach with a margin of safety
• Investments at distress valuations
• Partnering with established strong regional developers
• Opportunistic allocation of asset segment and capital structure
• Invest in projects being Socio-Economic Value Accretive (SEVA)

Prudent Developer Selection

• Min 20 years of experience
• 5 Mn + sqft. delivered
• Execution capability
• Strong regional developers
• Strong sales franchise
• Superior land aggregation capability
• Sound financial track record
• Stakeholder satisfaction score
• Corporate Governance
• Accessibility – Management style

Risk Management Approach

• Capital structure
• Raising additional finance
• Charge on firm’s assets
• Business plan
• Appointment of project personnel, consultants, contractors, vendors etc.
• Marketing and Sales plan
• Change in cost structure
• Mortgage of land / Saleable area
• Personal Guarantee / Corporate Guarantee
• ~ 2 X security cover
• Change in specifications

Monitoring Mechanism

Conduct Monitoring Committee Meetings every 2 Months

Monitoring Committee comprises the following members:

• Company Promoter
• CEO/COO
• Head of Finance
• Head of Sales
• Head of Construction
• Head of Collections
• Head of Liaison

Participants from the ASK Group

• ASK PIA, CEO
• ASK PIA, CIO / Managing Partner (South)
• ASK PIA, VP/Sr. VP Asset Management
• ASK PIA, Investment Manager

Participants from External agencies

• Appointment of PMC (Project Management Consultant) and QS (Quantity Surveyor) by ASK for monitoring of Time, Cost and Quality

Core Investment Philosophy

• Prudent developer selection
• Top Six Cities (MMR; NCR; Bengaluru; Pune; Chennai & Hyderabad)
• Growth corridor drove by job creation in micro-markets
• Development stage & distressed opportunities
• Conservative underwriting – Margin of safety
• Controlled investments
• Asset management focus and monitoring
• Deep understanding of partner’s core values and operations
• Compounding opportunity

Investment Opportunity

Acquisition at Distress valuation 

• Value acquisition from distressed sellers
• Haircut to existing investors/ lenders
• Weaker players surrender project/s to stronger ones

Mismatch of Cashflows

• Replace existing lender
• Fully approved projects
• Mid/Last mile funding

Working Capital Funding

• Low-cost debt from banks/HFCs
• Lease Rental Discounting (LRD)

Covid-19: Crisis and Opportunity

Commercial Real Estate

• Commercial rentals have been under negotiation for part/full wavier during the lockdown and renegotiations thereafter
• Dedensification of offices due to social distancing can accommodate <50% of capacity
• Ongoing deliberations regarding the future of working from home

Residential Real Estate

• A significant slowdown in sales, collections and construction
• Pre-covid levels reached in 2021
• Refinancing continues to be a challenge

Countercyclical opportunity

• End user demand for affordable and mid-segment housing still intact
• Government impetus through stamp duty reduction and low-interest rates
• Further consolidation will be a boost for well-capitalized brands
• Increased deal flow for preferred return opportunities with conservative underwriting and margin of safety