DLF Cyber City Developers raises Rs 2,500 crore in two LRDs

Realty developer DLF’s rental arm DLF Cyber City Developers has raised about Rs 2,500 crore through two lease rental discounting transactions, a senior company executive said.

The two transactions follow one for Rs 2,400 crore that the company raised from State Bank of India in October 2020 at an interest of 7.35% for a 15-year tenure. With the latest transactions at 6.7% interest, the company said its overall interest burden will reduce.

Companies that operate rental assets raise money from banks through lease rental discounting using rental receipts as collateral. The bank takes into account the long-term rental income of the company and loan repayment is done using the rental income.

The funding was secured against two rental assets at DLF Cybercity in Gurgaon.

“In the last year or so, interest rates have shown a downward trend. Interest in our LRD borrowings have dropped from about 8.5% to 6.75-7.% now. This has brought huge savings, thus improving the bottom line,” Sriram Khattar, managing director of DLF Rental Business, told ET.

DLF Cyber City Developers, a joint venture between DLF and Singapore’s sovereign fund GIC, is restructuring existing loans in a bid to save Rs 300 crore annually, taking advantage of the benign interest rate environment.

Currently, the company’s total debt stands at almost Rs 19,000 crore and it is looking at an interest rate reduction of 120 basis points.

DLF, which operates about 35 million square feet of grade A assets in the country under its rental arm, is expected to take it to 40 million sq. ft. by December 2021. While two properties that are already part of DLF Cyber City Developers will become operational soon, the company will also bring in three-four more assets that are currently under DLF.

DLF has developed 153 real estate projects with a total area of about 330 million sq. ft. Almost 40 million sq. ft. of rent yielding commercial assets will be put under a REIT by DLF Cyber City Developers. The company has appointed an advisor and will be REIT ready in 12-15 months.

DLF Cyber City Developers has maintained a 95% occupancy level and collected 96% of its rentals during the past two quarters that were marked by the Covid-19 pandemic.