Development and Leasing Models

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Development and Leasing Models

• Symposium on Commercial Development of Railway
  Land
• 9th November, 2009
• India Habitat Center

Anil Kr. Gupta, GM Proj-II, RLDA
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Tendering System

• Two stage two packet system
• Adopted for the first lot of 12 sites and Sarai
  Rohilla site
• Single Stage two packet system
• Adopted for Bandra site in October 2008
• Single Stage two packet system being adopted for
  all future tenders

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Structure of the RFP Document

• Section-I
• The Instructions to Bidders (ITB)
• Section-II
• Draft Development Agreement (DA)
• Draft Development Agreement includes following
• Annexure A Draft Escrow Agreement
• Annexure B Draft Lease Deed
• Annexure C Draft Substitution Agreement
• Annexure D Salient Features of Sub-Lease Deed

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Eligibility of Bidders

• Technical Eligibility
• Developers, contractors and owners who have
  experience of building a minimum Built Up Area
  are eligible
• Financial Eligibility
• The Bidder should have a minimum Net Worth
• High Net Worth Companies
• High Net Worth companies not required to have the
  Technical Eligibility
• Consortium Bidders allowed to aggregate Members
  Technical Eligibility and Financial Eligibility
  provided the Member holds at least 10 and 26
  equity respectively

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Attractions for Developers

• Low initial Capital Investment in Land
• Only the First Installment of Lease Premium
• 10-12 of the Value of land
• Flexible Mechanism of Payment of Lease Premium.
• Payment of future Installments from Project
  Revenue.
• Right of First Refusal in re-bidding after expiry
  of Lease Period.
• Refund of 85 of amount of Lease Premium paid in
  case of failure of the Project to take off.
• Debt at lower interest rate due to low risk.

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Attractions for Lenders

• Substitution rights through Substitution
  Agreement.
• Escrow Agreement
• Clearly defined Substitution Termination
  Payments.
• One Bank can provide B.Gs, be the Escrow Bank
  provide Debt to the Developer simultaneously.

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Upfront Lease Premium Model

• For less than Rs 5 Crore expected Lease Potential
• Payment of Lease Premium in 3-4 annual
  installments
• B.Gs. for subsequent installments
• Bidding Criteria Lease Premium
• Gwalior site (Rs. 27 crore) successfully being
  executed on this model
• Vijayawada site tender is open on this model

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Lease Premium Model

• For Rs.5 Crore Rs.100 Crore Lease Potential
• B.Gs. for subsequent installment not necessary
• License Period for design and construction of the
  Project
• Ambedkar Circle, Vishakhapatnam site tender is
  open on this model
• Marketing rights during License Period for sites
  with Lease Potential of more than Rs. 100 core
• Bandra, Mumbai site will be launched on this Model

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Lease Rent Model

• Alternative to Lease Premium Model
• Being considered for sites having Lease Potential
  of more than Rs. 50 crore
• A small fixed amount (10-15) of Lease Potential
  is to be paid upfront
• Bidding criteria is the Annual Lease Rent
• Major part of potential Lease Potential is to be
  paid over the entire Lease Period

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Revenue Share Model

• For Air Space development at stations or existing
  structures
• Upfront payment of 10-15 of total Lease
  Potential
• License Rights to the Developer after payment of
  the first and only installment
• Marketing by the Developer but Sub Leasing of
  built up areas jointly by RLDA and the Developer
• Bidding criteria is Percentage Revenue Share
• Kolkata Metro air space development will be done
  on this model

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Other Development Models

• Joint Development Model
• With strategic partner like IRCON for MFC
• No equity partnership only business partnership
  with revenue sharing
• For long term phased development project
• Joint Venture Model
• Joint development with equity partnership of RLDA
  in the project SPV with the Developer
• Built Up Area Sharing Model
• Joint development with built up area sharing
  rather than revenue sharing

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Feedback, Questions and Suggestions