Prestige Estates Projects Ltd (Prestige) is today one of the leading real estate developers in the country. The company has emerged as one of the strongest brands in the real estate sector with its multi-city and multi-segment presence. It has become synonymous with iconic designs and world-class quality in creating real estate projects across residential, office, retail and hospitality segments. Having embarked upon its journey in 1986 from southern India, it has gradually built up a presence across the top 12 markets in the country.
The company, which has developed several large residential colonies and commercial spaces in Bengaluru, Chennai, Kochi, Hyderabad, Mangalore, and Mysore, including Prestige Shantiniketan, UB City, Prestige Golfshire, Prestige Acropolis, The Forum, The Forum Value, and The Celebration Mall, has recently strengthened its footprint in the high-potential markets of Mumbai and NCR.
With an impeccable track record of execution and timely delivery, the Bengaluru-based company, widely appreciated for its customer-centricity, has completed 250 projects and has 29 ongoing projects across segments, with a total developable area of 36 million sq ft. Further, it has 34 million sq ft under planning and holds a land bank with a potential developable area of over 27 million sq ft.
In fact, the company, known for developing large integrated township projects, boasts of having over 150 million sq ft in its development pipeline across its residential, office, retail and hospitality portfolio. The company has been graded CRISIL DA1+ by CRISIL and enjoys a credit rating of ICRA A+.
In the last three-four years, when the entire real estate sector was faced with severe challenges on account of the pandemic as also slowdown in demand, the company not only showed a great deal of grit and resilience but was also able to keep the momentum going. In fact, it has sold 10,000 homes every year during this period.
New launches
In the last nine months or so, the company (in which the residential segment currently contributes around 75 per cent to the total revenue) has launched as many as six major residential projects and is looking to launch seven more projects, primarily in Bengaluru, Mumbai and Hyderabad, in the next 6-12 months.
The new launches include a mega 170-acre township project in Bengaluru. Called Prestige City, the project, located in south Bengaluru, will have 7,000 units (six phases) with apartments, villas and plotted developments. Since the company launched the project in August 2021, it has already sold 75 per cent of the first four phases, including around 4,500 units. The remaining two phases will also be launched in the next two-five months. In fact, the response to this project has been so phenomenal that it took just 24 hours to sell its entire inventory of around 800 plots.
While most players in the industry are currently busy completing their existing projects and that too within their existing geography, Prestige, in a significant move, has now also entered the country’s most sought-after market – Mumbai. In December last year, it launched a 250-unit premium residential project, Prestige Jasdan Classic, in Mumbai’s Byculla. In less than two months, the company sold over 15 per cent of the project.
In fact, the company is also looking to launch another residential project, Prestige Cosmos, in Mumbai’s Mulund suburb (this 30-acre land parcel was acquired from Ariisto Developers), while another one is being planned at Mumbai’s sought-after Pali Hill (Prestige Daffodils is a luxury development and spreads across 0.12 million sq ft). The cumulative development potential of these three projects is over eight-million sq ft. Prestige is also adding NCR to its portfolio and it is also looking to enter this market soon with a residential development of about three million sq ft in Noida, Sector 150.
The company is currently also constructing commercial/office projects in these two major markets. It has around nine million sq ft of office space under development at BKC and Worli in Mumbai. Prestige is constructing a hospitality-led mixed-use project spread over 7.7 acres in Delhi’s Aerocity in a JV with DB Realty. In addition, the company has close to 61.33 million sq ft across 50 ongoing projects and 68.42 million sq ft across 34 upcoming projects. As on 31 March, 2021, it boasts of having a land bank of around 262 acres.
“Home buyers have continued to repose their faith in our ability and business model. Having built a strong presence in the south, we now want to replicate our success in other major markets like Mumbai and NCR as well. We have created a very strong brand through our impeccable track record of timely delivery and execution capability; something that today’s buyers are eagerly looking for across all markets,” says Swaroop Anish, Executive Director, Business Development, Prestige.
Strong brand recall
“Despite all the market-related headwinds, we have continued to maintain our momentum. We believe that our impeccable execution track record, coupled with a strong brand recall, will continue to drive our growth journey going forward as well. In a bid to take our growth to the next level, we have entered Mumbai and NCR with a series of launches in the residential as well as office segments. Both the cities continue to be the most attractive real estate destinations in the country and we would like to leave our mark in these two locations as well,” says Venkat K Narayana, Chief Executive Officer, Prestige.
Backed by these new launches and the timely delivery of ongoing projects, the company has put up a robust performance, despite the challenging operating environment. It has registered its highest ever quarterly sales of Rs4,268 crore, up 111 per cent YoY and has clocked the highest ever collections of Rs2,432 crore, up 70 per cent.
For the first nine months of the current fiscal year, the company saw its sales almost doubling to Rs7,113 crore (YoY), while collections grew 51 per cent to Rs5,005 crore. In fact, Prestige is all set to achieve a milestone sales number of Rs10,000 crore for the full year of the current fiscal, which, experts believe, will be a defining period not only for the company but also for the entire residential sector as it bounces back after four-five years of downturn.
Buoyed by this performance, the company’s share price has more than doubled in the last 12 months: from Rs271 on 1 February, 2021 to around Rs490 on 1 February, 2022. With a 52-week high and low of Rs553/Rs260, the company currently enjoys a market capitalisation of around Rs19,500 crore. In fact, ever since the company got listed in 2010 following an IPO raising Rs1,200 crore, the share has been always been a favourite of investors.
“We have reported our best-ever sales and collections. This demonstrates the strength of the Prestige brand and the attractiveness of our products, enabling us to outperform the overall market. The new sales were backed by the great response to our newly launched projects in Bengaluru and Hyderabad, and the existing inventories across geographies. It is a very exciting time for the brand, with new launches and markets to support the ambitious growth plans we have set for ourselves. This is thanks to the relentless dedication of our employees across cities. We look forward to continuing to expand our footprint in high growth opportunity markets,” states Irfan Razack, 68, chairman and managing director, Prestige Group.
Backed by all these activities, the company is preparing for the next growth phase in a big way in the consolidating marketplace where buyers prefer reputed and branded developers. In a significant move, the company, actively focusing on capital recycling across its business segments, took the decision to bring down the debt on its books. In FY2021, the company pared its net debt to Rs1,314 crore with a debt-equity ratio of 0.19 as against 1.46 in the previous year.
Next leg of growth
In FY21, Prestige completed one of the biggest capital recycling programmes with the Blackstone Group, aimed at unlocking capital for its future growth. The programme, executed in two phases, was valued at around Rs9,160 crore. Of the two phases, the company has completed Phase 1, which is valued at Rs74,67 or about 80 per cent of the total transaction value. It included the sale of 12 assets/undertakings comprising completed projects in retail, office and hotel assets.
Phase 2 of the programme will also be completed soon. The cumulative assets include 100 per cent stake sale in six completed office projects (including a hotel), 50 per cent stake sale in four under-construction projects and 85 per cent stake sale in nine shopping malls.
“We believe this transaction will further strengthen our foundation to drive the next leg of growth. Further, it will help us in building a long-term strategic partnership with the Blackstone Group and leverage the respective strengths of both to create value for the stakeholders. The proceeds from the sale in the first phase were utilised to bring down debt, resulting in a healthy debt-equity ratio and putting us on a strong growth path,” says Razack whose father Razack Sattar, founded the Prestige group way back in 1956 as a 600 sq ft menswear retail outlet, Prestige House for Men (now Prestige the Man Store, 20,000 sq ft of clothing, bespoke tailoring and accessories) on Commercial Street in Bengaluru.
In 1986, the family (Razack and his two younger brothers: Rezwan, currently joint managing director of the group and Noaman, whole-time director) diversified into real estate with its first project Prestige Court at KH Road, Bengaluru. While over the years, its real estate business has grown by leaps and bounds and is currently one of the best realty developers in the country, the family has not done away with its menswear retail. In fact, the retail business has also expanded in multiple locations in Bengaluru as also Malleswaram and Chennai.
Razack has steered the company to a great height with keen business acumen and foresight, placing the highest priority on ethical business principles and practices. Under his able leadership, Prestige is today the only CRISIL DA1 graded developer in India. Considered one of the leading authorities on real estate in India today, he has won several awards and accolades. Though family members (in the last few years, third generation has also joined the company) are actively involved in the business, Razack who has been a true proponent of governance, has created a strong leadership team with best talents from across the industry.
“With our unparalleled execution track record, balanced portfolio across segments and geographies and deep management expertise, we are uniquely positioned to capture opportunities for growth and gain from the accelerated consolidation that is taking place in the real estate industry. We have a strong development pipeline of about 43 million sq ft office and retail portfolio in the key locations across the cities and in the next 4-5 years it is projected to yield rentals of Rs3,000 crore per annum, a growth close to 10x our post deal rental portfolio of about Rs300 crore,” avers the chief of the Prestige Group.
The company has more than 150 million sq ft in its development pipeline across residential, office, retail and hospitality portfolio, which is projected to provide steady cash flows over the foreseeable future. “We are confident about our ability to capitalise on the emerging opportunities to drive growth and value through a focussed strategy, resilient business model, expertise of our people, and deleveraged balance sheet,” believes Narayana who has been associated with the company for the last almost two decades. A qualified chartered accountant, cost & management accountant, company secretary and law graduate, he has been instrumental in executing pioneering plans of action that have time and again proved his remarkable capability to lead from the front.
“With a robust track record of having delivered 250 projects aggregating 136 million sq ft across residential, office, retail and hospitality segments, we are positioned attractively to capitalise on the emerging trends. With our planned expansion and steady pipeline of launches, we expect a strong business traction in the coming years,” adds the CEO.
“Prestige Group is known for its exceptional contribution to the real estate sector. Despite challenges posed by the pandemic, it is commendable to see several positive developments by the brand like initiating multiple new launches across various regions, collaborations in the hospitality sector, etc. The group is known for its on-time delivery of projects and I feel this is one key factor that differentiates the Prestige Group from its peers. To be able to not only withstand a challenge, but also manoeuvre through these barriers efficiently and deliver the best, clearly shows how strong and resilient a brand is and I feel Prestige exemplifies this,” says Ashish Narain Agarwal, Founder & CEO of new-age brokerage firm propertyPistol.com, which carried out property transactions worth Rs3,465 crore in the first nine months of FY22 itself as compared to Rs 2,012 crore in the entire 12 months of FY21.
Betting big on Mumbai
While the company has exited a significant part of its rental yielding office portfolio with its capital recycling programme with Blackstone, it has put out a mega plan in the office sector. The company is looking to build around 35-40 million sq feet of premium next-gen office space in Bengaluru (28 million sq feet), Mumbai (6.5 million), Hyderabad (2 million), NCR (1.5 million), Pune and Chennai and in the next four-five years.
Of these projects, around 15 office projects are under construction and around 12 are under planning. This will take its annual rental across the office portfolio to Rs2,500-3,000 crore in future. Currently, the office vertical contributes around 15 per cent to the company’s overall all revenue.
The company is betting big on the Mumbai office market. It is investing around Rs4,500 crore to develop around 7 million sq ft of commercial real estate in Bandra-Kurla Complex (BKC) and Turf View at Mahalakshmi in South Mumbai. Both the projects are futuristic office spaces, being built taking into account the increasing importance of health safety and decentralised work, and providing flexible working areas.
Called Prestige 101 BKC, the 4.5 million integrated commercial development will be the largest single office address in BKC, Mumbai. Apart from twin office towers, there will be urban amenities (200,000 sq feet) as also shopping, dining and entertainment areas. The project is a joint venture (50:50) with DB Realty and ABIL, and will also have a premium hotel.
The new business project, a standalone ground plus 63-storey and a 43-floor Liberty Tower property (also a twin tower) in Mahalakshmi, will be the tallest office property (290 metres) in the country. The 2.5 million sq ft property (50:50 JV with DB Realty), which is scheduled to be completed by 2025, will have 400,000 sq ft of facilities space together with a viewing gallery on the top floor.
“Construction finance for both the projects has been tied up, and we are seeing strong demand for some large requirements. The proposed funding is, without doubt, one of the largest for business property in Mumbai. Both the properties are already attracting occupiers from the banking, financial services and insurance, information technology and IT-enabled services and start-ups,” stated Juggy Marwaha, CEO, Prestige Office Ventures.
Meanwhile, overall office space absorption is reviving and growing better than expected. This is attributable to the strong fourth quarter of 2021, building on the momentum witnessed during the previous quarter of the year. Overall office gross absorption across the top six cities was at about 33 million sq feet, 10 per cent higher compared to 2020, as per Colliers.
Pan-India absorption during 2021 surpassed the annual gross absorption during 2016-2018 by 7 per cent, signalling a strong revival in occupier confidence. Occupancy levels rose in prominent office micro markets across the top three cities at the end of 2021, led by a gradual revival in demand and fewer occupier exits.
“The year 2021 has emerged to be better than expected, considering the devastating wave we saw during the year. Demand continues to be led by technology companies. However, we are seeing greater appetite for office space by start-ups. The year 2022 will be even better, even if the concerns of Covid-19 persist. Gross absorption in 2022 will be about 15-20 per cent higher as occupier confidence is back in the market,” says Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.
“Despite a temporary setback, demand for office space is expected to be robust on the back of businesses moving to India for a stable work environment, an increasing proportion of employees returning to offices and increased space requirement to facilitate physical distancing. We are future-proofing our offerings through our distinctively designed office spaces laced with tech-driven asset services,” adds Marwaha.
Apart from commercial office space, Prestige also has a presence in retail, hospitality and property management, together contributing around 10 per cent to the company’s revenue. The company operates its retail segment (current revenue Rs191 crore) under the well-known mall brand ‘Forum’ across six cities and endeavours to be the country’s largest mall developer. The pandemic has impacted operations and footfall in the segment; however, a gradual recovery is expected to drive recovery going forward. The company has constructed 10 large malls (7 million sq feet), and currently has six malls (6 million sq feet) under construction.
Prestige is an eminent player in the hospitality segment (eight completed projects; present revenue: Rs104 crore) and is known for developing landmark hotels, resorts, spas and service apartments in collaboration with its partners. Its properties operated in central locations of India are preferred by business and leisure guests alike and recognised for exclusivity, discerning services and luxury. The company, which partners with the world’s leading hospitality players like Hilton, Marriott and others, currently has 1,071 operational keys.
Prestige started offering a comprehensive property management service (revenue: Rs445 crore) nearly 25 years ago and is a forerunner in the space. A team of highly skilled members provides top-notch support and maintenance services for all Prestige properties, upholding the unimpeachable standards of the company
Meanwhile, the real estate sector showed great resilience in 2021. In fact, the residential market has made a big turnaround. In its latest report, Knight Frank India notes that this sector had an unprecedented year of growth with sales rising by 51 per cent (YoY) with 232,903 units across the top eight cities. New home launches also saw the significant rise of 58 per cent YoY with the addition of 232,382 units in 2021.
Poised for an upcycle
According to the Real Estate Thematic report of Motilal Oswal Financial Services, the residential real estate sector is poised for an upcycle, primarily buoyed by the improved affordability. A decadal low (sub-7 per cent) interest rate regime, stagnant prices over the last seven years, and a rising income base (last 10 Year CAGR: 7-10 per cent) have driven the affordability quotient.
Meanwhile, the domestic real estate market is under consolidation and here organised builders with proven track record are expanding their share. Buyers are looking out for players who can deliver homes on time even if they have to pay a premium. The recent Covid-affected market has further accentuated the whole process, even as organised players like Prestige and others are gearing up to explore the opportunities in an effective manner.
“The real estate market is consolidating in a big way. The market is rapidly evolving and throwing out an array of opportunities and that is where large players can play a bigger role,’’ says Ashish Puravankara, managing director, Puravankara Ltd, who is of the opinion that in this transforming marketplace, one has to be more focussed in order to meet the specific requirements of the buyers, who have become more discerning and informed.
With all these developments in place, Prestige, led by Irfan Razack and its core management team, has strengthened its position further in the market. The company is looking to commence its next growth phase in a more effective manner. Having built a strong presence in the South Indian market, it has recently forayed into the country’s two major markets of Mumbai and NCR. Though real estate has primarily been a regional play, the overall real estate market has undergone a major transition led by RERA and other policy measures.
With transparency and other elements of an organised set-up, the market is now turning into a more homogenous structure and Prestige is all set to replicate its success story on a much broader canvas. The market is also consolidating in a big way as buyers are preferring branded and reputed developers. All this has made the market quite favourable for branded players like Prestige which enjoys an impeccable track record of timely delivery and quality products.
In a significant move, the company has recently carried out a capital recycling programme with Blackstone to deleverage itself significantly. On the one hand, this will make its balance sheet stronger, and on the other, it will be able to revamp its overall commercial rental yield with the inclusion of new generation properties. All said and done, Prestige has shown itself to be agile enough to cope with market change and seems prepared to explore emerging opportunities, going ahead.