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Enron leases part of Bombay estate to Citibank

Freny Patel

After months of scouting for a buyer for its 100,000 square feet office space at Wockhardt Towers in Bandra-Kurla Complex, Enron has been able lease out 10,000 square feet of it to Citibank NA.

Against an expected realisation from Rs 1.30 billion for the outright sale of its four floors, Enron will get around Rs 12 million a year by leasing out one floor to Citibank.

The deal was struck recently by the global real estate consultant, Cushman & Wakefield, at a monthly rental of Rs 100 per square foot.

With property prices in Bombay having slumped and with no reprieve expected in the short run, companies are increasingly opting to lease space instead of blocking funds in illiquid assets.

Property consultants say that if Enron manages to lease out the entire four floors, it will be easier for it to sell the property to a buyer, as the buyer would be assured of a fixed income.

Enron had eyed a deal of Rs 1.30 billion when it mandated global real estate consultants to sell the premises at around Rs 12,000 per square foot.

This is despite the fact that real estate at Bandra Kurla currently fetches Rs 8,000 to Rs 9,000 per square feet. In June 2000, the US energy giant had shelled out Rs 1.26 billion when it acquired the four floors, plus car park space, from Wockhardt, the pharmaceutical company.

The deal was struck at Rs 10,500 per sq ft, and included parking space for 101 cars. Industry sources said that Enron had spent a sum close to Rs 1.50 billion to acquire the property, and pay for the interior furnishings of two of the four floors it had acquired.

In order for it to break even, it would have had to sell its real estate at the rate of Rs 13,000 per square foot.

Four to five global real estate consultants have been appointed by Enron for the sale of its premises. A leading consultant said that it has been difficult to find any buyers for such a large property. "Most international buyers prefer to take property on lease instead of an outright purchase," he added.

Moreover, the inefficiency of the building in terms of the super built-up area is another reason why corporate entities are not too eager to acquire the premises, and Enron's proposition continues to go abegging, said the consultant.

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