MUMBAI: After almost 18 months of negotiations,Jet Airways is close to signing a deal with Godrej Properties (GPL) to jointly develop a 2.5-acre plot at Bandra-Kurla Complex (BKC).
It is learnt that GPL will pay upfront cash of about Rs 150 crore to Jet. “GPL will further absorb Jet’s debt of about Rs 400 crore raised from HDFC. Both companies have agreed to a 50% profit sharing ratio once the real estate is developed,” said an investment banker.
While the GPL spokesperson declined to comment on the matter, a senior Jet executive confirmed the negotiations but without divulging the details.
Real estate sources attribute the delay in reaching an agreement to two reasons. “After the tentative agreement last year, the Mumbai Metropolitan Region Development Authority (MMRDA), the land owning authority, refused to transfer the land lease title in GPL’s name. Then, Jet had to go slow on selling the land due to its dispute with Sahara in the Bombay High Court. Both the issues are now resolved,” said a consultant.
The plot has a development potential of 12 lakh sq ft. In the earlier deal, Godrej had offered a compensation of Rs 450 crore, profit of up to 10% and builtup space of 2.5 lakh sq ft free of cost.
It is necessary for Jet to have 2.5 lakh sq ft in the new development as MMRDA rules stipulate that the airline, which had bid for the plot in the end-user category, has to occupy at least 60% space of the built-up area, which comes to 2 lakh sq ft.
The airline has, therefore, taken the joint venture route. According to rules framed by the MMRDA for BKC plots, the owner cannot sell the plot to a third party for five years after it has been developed.
According to information available, Godrej will invest approximately Rs 700 crore to buy additional floor space index (FSI) to build 1.4 million sq ft of saleable space.
The airline is currently headquartered at S M Centre in Andheri. This property is on lease. The deal will bring relief to Jet Airways as it will bring some cash immediately to the airline that has a huge debt. The carrier will save at least Rs 10 crore rent a year by shifting to the new office space.
Hit by the global economic slowdown beginning late 2008, Jet Airways was unable to develop the BKC plot.
“It is a win-win situation for both Jet and GPL. Besides, the airline will also get a state-ofart headquarters at BKC,” a consultant said.