Brookfield eyes Hotel Leela stake

MUMBAI:

Brookfield Asset Management

, one of the most influential infrastructure and real estate investors globally, is in advanced talks to buy into the troubled

Hotel Leelaventure

, said people directly aware of the matter.


Canadian investor Brookfield’s discussions are centered around assuming the debt held by JM Financial Asset Reconstruction Company. The marquee Indian hotel chain runs nine luxury properties, of which they own five, and has been grappling with high debt, pricing pressure and increased competition from global hospitality brands. JM holds a 26% stake and controls 96% of the restructured debt estimated at Rs 3,600 crore.

The promoter Nair family owns 47%, though most of it has been pledged, according to Hotel Leelaventure’s stock exchange filings. The deal with Brookfield would materialise if there’s an agreement on the promoters’ continued economic interest and management role in the hotel chain, the people said. The promoters are also working on other investor options, if there’s no alignment between Brookfield on their interests.

The other prominent transactions of Brookfield, which manages assets worth $200 billion worldwide, include acquisition of Reliance Communication’s telecom tower assets, buyout of real estate developer Unitech’s commercial office buildings and a portfolio of tollways from Gammon. When contacted, spokespersons for Brookfield, Hotel Leelaventure and JM Financial declined to comment.

The negotiations with Brookfield come even as the hospitality company passed an enabling resolution in June this year allowing JM to convert more debt into equity, which would give the asset reconstruction firm a larger ownership stake.

Besides assuming JM’s debt, Brookfield plans to infuse fresh equity into Hotel Leelaventure, the people said.

Brookfield’s move underscores the growing trend of private equity funds investing in properties and hotel operators managing them. The Hotel Leelaventure transaction, if materialised, will add to Brookfield’s global portfolio — in which it has

The Sheraton in Toronto

, and

The Diplomat Beach Resort

in Florida.

Building hotels via high-cost borrowings, lower returns, among other factors, impacted Hotel Leelaventure’s financials. The company has been in losses for the last six fiscals at least. About 220 hotels in the country are in the non-performing asset (NPA) list of banks — reflecting the broader sectoral woes.

Insufficient cash flows have restricted Hotel Leelaventure from meeting its debt obligations. It recently defaulted in its quarterly interest payments to Life Insurance Corporation ( LIC). At that time, the lodging company said its funds were escrowed with the lenders and were monitored by them.

In the past, Hotel Leelaventure sold its Goa and Kovalam properties to India-born overseas-based businessmen Raj Bagri and Ravi Pillai respectively to bring down its debt.