FAQ
A brief summary of the company’s background
The development company is Chattels Industrial Park Developers Private Limited (CIPD) which manages the entire lifecycle of the project.
CIPD is headed by Amit Damodar Chugh MRICS (ADC) who has set up
- Chattels Realty Consultants (CRC) in 2004 and has 20+ years in land acquisition experience having acquired land for a large number of developers (names and logos in the next sheet)
- All Warehouses (AWH) – a company that is a market leader in the industrial leasing space since 2019 (prominent tenants leased and sold to are seen on the next sheet)
Having mastered the 2 most difficult aspects in Real Estate – procurement (BD) and sales (leasing and exits) ADC has integrated both domain expertise to procure, build, lease and sell and that is the foundation of CIPD which used CRC to acquire land in the right location for cheap and build the right spec using the knowledge expertise from AWH.
All Industrial park developers face 2 critical problems
Land Acqusition – Issues faced:
- Legal issues – 9 out 10 lands in the city suburbs fail in legal diligence. Apart from being time consuming and expensive such a high percentage of failure at the beginning of a project makes it very demoralising in this business.
- Acquisition risk – getting the right size without any unfilled portions in the middle is a large risk and some landowners in between a large land will not sell at any price or for any reason.
- Possession problems – land traditionally has been used for agriculture and are leased from large to smaller farmers for long periods for cultivation.
- risk of zoning, conversion, approvals – green zones, buffer zones, wetlands, agriculture lands being converted for Industrial use are always a challenge.
- Getting land at the right location and especially at the right price is very difficult – the rates of lands have sky rocketed over the last 3 years in Industrial and warehousing zones.
Leasing of sheds – issues faced
- Wrong location: An example is the micromarket of Sriperumbudur which is 250 sq km or 6200 acres wherein just 4 spots comprising 200 acres dominate 85% of the leasing.
- Wrong specification: A wrong product that is designed by an architect who is not aligned with the specific needs of industries/ tenants in micromarket will not find an occupant.
- Financial expectations of landlords and tenants are not aligned/ matching – while owners look at RoIs the rentals may align to the cost of the sheds.
- Timelines for delivery – owners lack of understanding that tenants need visibility rather than owner’s needing advance confirmations.
- Tenant improvements vs increasing industry standard.
- Hybrid buildings – buildings that suit manufacturing and storage are ___ and easier to lease.
- Owners unprepared technically to understand client needs – the requirements of open spaces, parking, creche, canteens, driver rest areas, facilities for differently abled
- Approvals and compliances missing – over 90% plus sheds lack approvals.
- Sustainability and green building features impacting environment are not factored.
- All think their shed is Grade A – there is no defined parameters and absence of reputed agencies to Grade a shed.
Key differentiator of CIPD vs other Industrial Park developers:
CIPD is the only developer which is backed by CRC – a company that is into land acquisition at handles the complete risk of land acquisition passing on clean and clear land to CIPD at a discount to market price. A company with 20+ years of experience in land acquisition across Chennai having acquired large land parcels is reputed with 100% success and has no botched land acquisitions in it’s record.
CIPD is the only developer who is backed by a large leading leasing team of AWH that knows the market inside out. With All Warehouses handling 1500+ sheds, working with over 500 landlords in Chennai and closing over 50 leasing transactions a year. AWH generates over 2000 leads and enquiries a year and with this market Intelligence is exactly able to advice precisely on “WHERE TO BUILD” AND “WHAT TO BUILD”.
CRC Profile: – noteworthy transactions (NOT ALL) completed:
This includes only transactions recorded in the name of CRC and not our other firms
2007 – acquisition of 10 acres of land for Mantri Developers at Padur – their first land in Chennai.
2008 – acquisition of lands in Sriperumbudur, Padappai and Sunguvarchatram – 10 acres
Sale of plotted development in Tiruvallur of 150 plots.
2009 – Joint development structure for Brigade Enterprises – their first land in chennai.
2010 – Outright sale and JD of 16.7 acres for Mantri developers in chennai.
2011 – Joint development of 11 acres for Sattva Salarpuria Exit for DRA projects (24.5% stake) to Aditya Birla Capital in L&T Eden Park in Siruseri OMR (118 acres township).
2012 – acquisition of 5 acres in Mahabalipuram and sale of plots.
2013 – Joint development for 4 developers incl Adroit developers, Sattva Salarpuria, GT group and
2014 – acquisition of 15 acres lands in Mahabalipuram.
2015 – sale of plotted developments in Mahabalipuram of 5 acres.
2016 – Joint Developments done for Merlin group, belani group in Chennai.
2019 – sale of land of Sobha group to G Square – 34 acres.
2020 – start of acquisition of Ezhichur lands.
2021 – Koppur lands – 10 acres acquired.
2022 – registration of Ezhichur lands – 22 acres + Koppur lands – 10 acres acquired.
2023 – registration of Ezhichur lands – 22 acres + Vadamangalam – 15 acres acquired.
2024 – registration of 60 acres at Aruduru (Sricity).
2025 – start of acquisition of Ezhichur 2 and MM nagar.
AWH – Note worthy transactions (ONLY THE ONES RECORDED IN THE BOOKS OF AWH: I have chosen some in green color highlighting
| Sengadu | Warehouse | 15000 | Sodexo | Both tenant and Landlord |
| Kosapur | Warehouse | 64500 | Girias | Both tenant and Landlord |
| Poonamallee | Warehouse | 25000 | Shadowfax | Landlord |
| Gudapakkam | Factory | 44500 | Cavotech India PVT.Ltd | Both tenant and Landlord |
| Periyapalayam | Factory | 135000 | PA Foot Wear Pvt Ltd | Both tenant and Landlord |
| Oragadam | Factory | 201500 | Jost World - Phase 1 | Both tenant and Landlord |
| Irrungattukottai | Factory | 22000 | TGI Packaging | Both tenant and Landlord |
| Mannur Sriperumbudur | Warehouse | 60500 | Il Jin Electronics | Both tenant and Landlord |
| Periyapalayam | Warehouse | 21000 | Ittochu - PISPL | Both tenant and Landlord |
| MM Nagar | Factory | 39500 | Innovance | Both tenant and Landlord |
| Mahindra World City | Warehouse | 20000 | SBI (Capital Records) | Both tenant and Landlord |
| Sriperumbudur | Factory | 122000 | Polyhose (3 sheds) | Both tenant and Landlord |
| Sunguvarchatram | Factory | 30000 | Emm Ess Aircon | Both tenant and Landlord |
| Oragadam | Warehouse | 129000 | KM Trade links | Both tenant and Landlord |
| Irrungattukottai | Factory | 67000 | Ymer Technologies | Both tenant and Landlord |
| Red Hills | Warehouses | 17000 | Reliance Jio | Both tenant and Landlord |
| Sriperumbudur SIPCOT | Factory | 30000 | Plastoranger Tech | Both tenant and Landlord |
| Poonamallee | Warehouse | 65000 | Lesso | Both tenant and Landlord |
| Tada - Sri City | Warehouse | 90000 | Alstom | Both tenant and Landlord |
We are a combination of both but can we referred to more as a developer as we raise capital ONLY for projects that we execute.
Management
All funds have been successfully managed by ADC and his team that include individuals for
Location advisory (AWH team)
Land Acquisition (CRC team)
Liaison follow up - conversions, approvals and Plan sanctions (CIPD team)
Design advisory (AWH team)
Execution - by team of engineers (CIPD)
Leasing advisory (CIPD)
Property Management services - (CIPD)
Performance and achievements
Exit - Ezhichur slide (Available in the Pitch Deck)
Leasing - Koppur slide (TO BE MADE) - India’s best shed - leased at 30% premium to market rentals.
investment objectives/goals:
The investment objectives are aligned with proven market practices on performance that will deliver 15-17% IRRs over a 4 to 8 year period which translates into nearly doubling of money in 4.5 years or 3.5x in 8 years.
investments (private fund) - constituents
These investments are from UHNIs and family offices most commonly and this is a private fund structured as a separate SPV (private limited) for each project where shares are allotted to investors. These equity shares are proportionate to the investment made. The constituents are people known and most commonly repeat investors.
This is a simple private limited company wherein all are shareholders. Every stake holder sells his shares on exit which turns out to be tax efficient after a period of 2 years.
Most of ur end buyers are large fund houses who cannot buy a LLP and they prefer buying a private limited and we need to align with their requirements.
For legal we use top brands like Fox mandal, Amarchand mangaldas, Khaitan, Indus law and similar brands whom large international fund houses use normally.
Our auditors are Sanjiv Shah Associates.
Seed capital by manager
The investments made by ADCs family fund is between 10-25% in each fund.
Every fund is locked in for 4 to 8 years on paper after which it is a compulsory exit (Drag along Tag along) unless 75% or more of the shareholders decide to continue and in which case they must purchase the shares of the remaining 25% who want to exit. However exit options will be worked for all jointly on from the moment of leasing of the first shed which normally takes 4 years for the entire property.
Since we buy land in the size of 20 to 60 acres it takes us 2-3 phases to develop it fully with each phase lasting a year and the best realisation is derived when the entire property is completely built and leased.
The company issues equity shares for a minimum value and for additional investments above that CCDs are issued with coupon rates of 0.01% which can be increased up to 15% at any time. These CCDs will permit the distribution of rental income to the investors as interest and avoid double taxation. The interim sale of these CCDs will be treated and taxed as equity (12.5% tax on long term capital gains on the sale of unlisted securities). The alternative is issuing CCPS or Preference shares with coupon shares instead of CCDs and the call on this will be taken at the appropriate time due to evolving and ever changing tax and compliance implications.
Purchase and sale of fund shares, tradeability and exits.
The company shall do a valuation of it’s shares annually in March. Investors who wish to exit interim can do so at a fair market value of the company and the ROFR rests within the investor group for 30 days from the date of valuation and the intention placed by the investor who wants to exit. However no exit shall be possible for a minimum period of 2 years which is a compulsory lock-in period
Why is the term fixed as 4 to 8 years and not lower or higher?
Basically the time period of the fund is as per the deliverables below:
| Years | Job to be done | Investment | Type of funding |
|---|---|---|---|
| 0 - 1 | Month 1 - 3 land acquisition Months 3 - 9 conversion and filing for building approvals |
Cost of land, SD, Registration, conversion, fencing | Equity of first few shares needed for the purpose |
| 1 - 2 | Construction of Phase 1 sheds and development of Common infrastructure | Approvals and development cost for Phase 1 and infra | Equity of remaining paid up shares |
| 2 - 3 | Leasing of Phase 1 sheds and obtaining building approvals for Phase 2 shed and start of construction of Phase 2 sheds | Development cost needed for Phase 2 sheds | LRD taken for phase 1 sheds and minimal equity contribution from investors |
| 3 - 4 | Leasing of phase 2 sheds and obtaining building approvals for Phase 2 shed and start of construction of Phase 3 sheds | Development cost needed for Phase 2 sheds and completion of the project | LRD taken for Phase 2 sheds and Project finance for the shortfall for LRD |
| 4 - 5 5 - 6 6 - 7 |
Stabilisation of the lease and asset management. We will start looking for exits whereby we can clear the LRD and Project finance and give exits to investors | NIL | NIL |
| 7 - 8 | Typically the period when the debt is cleared by rentals and free cash flows begin for all investors | Yield rates are quite high as compounding has happened during the holding period | Compulsory exit for those wishing to take the same |
Value addition stages:
There are 3 stages where maximum value is added to the asset:
- Completion of acquisition stage – a large land commands premium and we always buy land at cheaper than market price. Therefore the incoming investor at land stage immediately sees a bump in valuation between equity infusion and completion of acquisition. This stage normally takes about 3-4 months from the start of investment.
- Completion of compound wall, conversion and plan sanction and getting the site completely ready for development – this stage again adds premium as possession is clear and plan sanction jobs with unclear timelines are completed. Further development is immediately possible and there is visibility of rentals commencing. This stage takes about 1 year.
- Signing of Registered Rental agreement and start of rentals for each Phase: Once this is done the asset becomes immediately sale-able on a RoI basis and not on a cost basis. The first shed can be rented in about 1 year from the commencement of construction.This stage keeps repeating itself for each and every shed as we keep building on the remaining land util it is exhausted.
We would ideally look to sell the asset only after all sheds are leased and the asset is stabilised
What are the inclusions and eclsuions in the investment amount?
The project’s known costs are stated in the working sheet. Besides the same there is:
ANNUAL COMPENSATION TO FUND MANAGER
- The Investment company which is the SPV for the project
- The Management Company (CIPD)
The SPV will pay CIPD the basic fee for Fund management
What are possible exclusions in my investment amount?
There are other costs on conversion, plan sanction and approval and tax assessment that cannot be documented in the working sheet and will have to be paid in stages at the appropriate time. Though extremely rare, there could be any random unexpected matters/ issues that may crop up and may need to be addressed in the project on land, approvals, cost escalations on construction etc that are unknown are normal in Real Estate development.
Investment strategies (Entry and development)
- Land is purchased in locations advised by AWH as they know exactly where the demand is and they can advise on “WHERE to buy”. We constantly understand the growth/ development potential of an area and buy where demand outstrips supply.
- Land is purchased at prices lower than market directly from farmers in most cases to get the price advantage. Chattels Realty being a land acquisition firm makes this possible.
- The asset that is built is a hybrid building – it will suit manufacturing and as well as warehousing so that the client base is bigger. However we lease mainly to manufacturing tenants as they invest heavily into the property giving us the long term occupation guarantee and lower vacancy rates. This also gives us better financial leverage.
Risks and it’s mitigation:
- Legal of land: Land is the riskiest of all stages of investment and the de-risking happens by Chattels Realty signing agreements with the farmers and getting clear legal opinions from top lawyers before investor money is deployed for registration. Investors put money into the SPV for equity shares only after the above is completed.
- Unfilled gaps in the land: In land acquisition this is an imminent risk as farmers sell on different days. However in our registration process, we normally register (frontage) land with access from the road and continuously keep buying behind the same.
- Delays and in conversion and plan sanction/ other approvals/ construction/ leasing. This matter is not under the control of any developer/ investor but we make sure that there are no impediments or restrictions before we buy the land. We use reputed liaison agents to handle liaison work with government departments. Construction contracts are given to contractors with a good track record. Leasing will be handled through direct marketing and all agencies engaged in the business.
- Cost escalations: Predictive real estate gives returns of 7-9% per annum. We are developers and are projected to deliver 15% which definitely has risks on cost overruns to solve unknown issues that may arise out of development and these amounts cannot be predicted in advance. Whatever needs to be done to deliver the project in time with mitigation of unpredicted costs will be decided as required by the Investment Manager.
- Vacancy of the shed due to the design/ specification being irrelevant: “WHAT to build” is also advised by AWH as interacting continuously with tenants gives AWH the insight to understand what kind of product is needed in that specific micro-market and advises us on the needs of tenants in that location.
- Oversupply concerns: We constantly understand the growth/ development potential of an area and buy land only where demand outstrips supply.
- Co-investors not being in sync with the plan. The business plan is detailed upfront and documented in the SHA and in extremely rare cases major alterations may occur in which case all investors will be consulted and we shall vote for a majority decision.
- Co-investors not paying as per their commitments: The schedule is shared with all co-investors (who are reputed and known to us well) and all commit to pay as per the projected timelines. There are technically 2 stages for equity infusion – Land and Construction. Land equity is never a concern as equity shares are allotted only upon full payment. Construction payments are based on timelines and perhaps some for investors, fund planning may go wrong.
There are two ways to address the same:
- Additional equity may be allotted for money coming in during construction which shall be proportionate to the original equity ratios.
- Partial equity dilution by such investor to compensate for non payment and this will require a valuation to be done at stages as the project value will alter over time. A fair market value will be assessed and ROFR will be given to existing investors to purchase such equity
Decision making process and transparency:
- The entire decision making process rests with us as we have the experience and track record in delivering projects with high returns.
- Reports will be sent to all investors on a monthly basis on what has been completed and what is being projected for the upcoming month. There will be physical/ online meetings with all investors every quarter
