At a time when the pilots strike has badly affected operations and revenues, cash-strapped national carrier Air India is in talks with its lenders to lease large portions of its iconic sea-facing headquarters in Mumbai’s Nariman Point to generate around Rs 36 crore annually as rent, an Economic Times report said today.
“It is most likely that lenders that recently recast its debt might end up with a lion’s share in the skyscraper, as sources say some of the public sector entities the airline is in talks with are Life Insurance Corporation of India and SBI Capital Markets,” said the report. The tenants will be finalised later this month at an Air India board meeting.
The airline board has already approved plans to mobilise Rs 5,000 crore in five years through sale of prime assets. The real estate assets are likely to bring in Rs 500 crore annually for the airline.
The airline has also decided to shift its headquarters to New Delhi as big operations have almost moved to the capital since Terminal 3 has been made the carrier’s international hub. If leased out, the 23-storey building with 220,000 sq ft space could fetch at least Rs 200 crore annually. Most of the floors of the 23-story sea-facing Air India Tower in Mumbai’s prime business hub Nariman Point have been lying vacant for quite some time with the only major occupant being the software behemoth TCS.
The South Mumbai business hub of Nariman Point has traditionally commanded the highest rentals in India, and has been among the top 10 costliest spaces in the world. But, over the last three years rentals have slipped considerably as financial institutions have shifted their offices to other business districts such as Lower Parel, Bandra-Kurla Complex and Andheri, resulting in atleast a 20 percent vacancy.
Last year, when Bank of America took on lease (Rs 93 lakh a month) two entire floors in Express Towers, many thought the transaction could help Nariman Point redeem its fading image . However, it was a one-off deal and did not reflect the general market conditions in this commercial business district.
According to the 2012 first quarter data released by property consulting firm CB Richard Ellis (CBRE), per sq ft monthly rentals in BKC are in the range of Rs 250-300 while. office space monthly rentals in Nariman Point slumped to Rs 240-290 per sq feet in the same period, making the alternative business district of Bandra-Kurla Complex the most expensive area for office rentals in Mumbai.
Over the last one two years, investment firms and financial companies such as Lazard, Temasek and the Royal Bank of Scotland moved out of their Nariman Point offices and consolidated their operations in larger offices in BKC, while Kotak Mahindra is expected to follow suit soon.
“Larger floor plates, easy accessibility, more parking space,quality building and more office space as compared to Nariman Point is the prime reason for this shift, a realty expert told Firstpost.