Cybercity partners with Hyatt
HYDERABAD: Cybercity Builders and Developers has teamed up with Hyatt Hotels Corporation to build two five star business hotels with an investment of about Rs 400 crore.
The proposed ‘Hyatt Place’ brand hotels will come up in Hyderabad and Bengaluru with 200 rooms each. This is Hyderabad-headquartered Cybercity group’s first foray into the hospitality business.
The group, which has residential projects in four southern states, is also diversifying into commercial and office properties and into affordable residential property segment as well, said chairman K Murali Krishna.
“The proposal to get into hospitality, commercial and office property development is part of Cybercity group’s strategy to ensure steady income streams,” Krishna said.
Cybercity group has already signed an agreement with Hyatt for the proposed hotel in Hyderabad, abutting Hyderabad-Mumbai national highway at Kukatpally, and hopes to complete formalities for a similar agreement for the Bengaluru project shortly.
“Both the business hotel projects will be built using internal resources and debt, and we may consider divesting partial stakes in the hotel assets company once they kick off operations,” Krishna said.
On the decision to go for business hotels, Krishna said, “The investments and operating costs are relatively low in business hotels. We may spend around Rs 70 lakh per room in business hotel as against Rs 2.5-3 crore a room spent on a premier five-star hotel. At less than a third of the investment, the business hotel fetches room rents of around Rs 4,500 a day against around Rs 8,000 a day in a premium hotel.”
Cybercity owns a 70-acre land parcel near Kukatpally, of which over 55 acres was earmarked for residential properties and the rest for commercial, office space and hospitality properties. In the first phase, the company is looking at developing 1 million sq ft of land, involving about Rs 300 crore investment, to complete the project by mid of 2019.
The group has also decided on foray into affordable housing through a special purpose vehicle and has already secured some contracts from the Telangana government for building double-bedroom houses.
“We have readied plans and obtained approvals to build around 2 million sq ft of affordable apartments near Bengaluru. In all, we have prepared plans for around 10 million sq ft of affordable apartments across southern cities and some global PE funds with specialised focus on affordable housing segment have shown interest in investing in this SPV,” Krishna said.
Some of the PE funds that had earlier invested in Cybercity’s SPV through debt instruments include Goldman Sachs, Walton Capital and IDFC Real Estate Fund, which together invested about Rs 300 crore. EY, KPMG and PriceWaterhouseCoopers had done due diligence on behalf of these PE funds.
JM Financial and Motialal Oswal are now in talks with the company to invest through debt instruments in the residential property SPV in Hyderabad, Krishna said. “Several global PE funds are showing interest to pick up equity stake in the parent company. However, we may look at divesting a minority stake of about 20% at the parent company level only after we launch development of some 40 million sq ft of properties spread across four southern cities and sell at least 20% of them, which may take another 18 months, so that it fetches us better valuations.”
Cybercity plans to complete construction of 40 million sq ft of residential, office and commercial properties by 2025, involving about Rs 10,000 crore investment in phases. The company has so far sold over 4.5 million sq ft of residential projects and handed over around 2.5 million sq ft till date.