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Citigroup's Rs 985 crore office space buyout biggest commercial property deal

Kailash Babar, Mumbai, The Economic Times

April 25, 2012


In a dismal real estate market, US banking giant Citigroup on Tuesday closed the biggest commercial property deal. Citi bought six floors of office space in Mumbai's Bandra Kurla Complex for Rs 985 crore to house its India headquarters, from a consortium led by the Purnendu Chatterjee Group.

Two Citigroup entities - Citibank NA and Citigroup Global Markets - have taken up over 297,000 sq ft at First International Finance Centre (FIFC), an upcoming office tower a block away from the Citigroup Centre, where the bank's India operations are currently housed. "This investment represents yet another significant commitment by Citi to its franchise in India," said a Citi spokesperson. "FIFC will house all key businesses of Citi, currently spread across Mumbai and other cities."

Citi will shift all consumer-facing businesses such as finance, core banking and private banking to FIFC, leaving administrative departments, finance, legal and HR with the Citigroup Centre. Citi's institutional brokerage, research and investment banking businesses will be shifted from Nariman Point in south Mumbai to FIFC, which will also accommodate some businesses from Gurgaon and Chennai.

Officials at Ernest Towers - the special purpose vehicle that owns the building - declined comment. Transaction advisor CBRE remained unavailable for comment.

Most of the consideration for the building has already been paid.

The last installment will be paid in June, said a person familiar with the deal.

More than 90% of the building is ready and is expected to be handed over to Citi in the next few months.

The 13-storey FIFC, built over 2 acres, is jointly owned by Purnendu Chatterjee's TCG Urban Infrastructure, New York-based Vornado Realty Trust, Starwood Capital and Hiranandani Group. Urban Infrastructure Venture Capital, promoted by Mukesh Ambani confidante Anand Jain, also holds a stake in Ernest.

The transaction was registered on Tuesday. Although inquiries for commercial assets have gone up, conversion of the same is taking time owing to negotiations running over months.

Most of the recent large commercial transactions were signed on lease basis as corporates have been preferring to rent it out than lock capital for owning the asset. But, recent inquiries are showing a slow change in the trend.

"Many corporates think this is the right time to buy commercial assets as prices are almost 50% off their 2008 peak. Most of these buy decisions are also related to corporate headquarters and not for branches. Of late, the proportion of buy decisions against lease has been increasing," said Ramesh Nair, managing director-west, Jones Lang LaSalle India.