Sunday, 25 November 2012
Air Indias Plan to Lease HQ Gets Poor Response
Weak response from private sector corporate houses to Air Indias
proposal to lease out its seafacing HQ building at Nariman Point in South
Mumbai has strengthened the case of its lenders and other public sector
enterprises.Air Indias lenders,who had earlier planned to take up space in this
iconic building,are keen to move in and formalise the transaction,said persons
familiar with the development.Given this backdrop,the national carrier has
extended the deadline for submission of bids for leasing space by nearly a
month as big private players showed little interest,and most of the bids
received so far have been from public sector enterprises.Air
India,however,declined to comment on the developments.The bids for a total
159,000 sq ft space in this building,which were scheduled to be opened on
November 3,have now been rescheduled to November 29.Property consultants
attribute the lukewarm response from private sector companies to a few
factors,including security deposits and the overall sluggish environment in the
commercial realty market.In October,Air India started leasing out 12 of this
23-storey tower with November 3 as the last date for submission of
interest.Each applicant was expected to pay an earnest money deposit of
minimum.50 lakh per floor subject to a maximum of.1 crore.The airline had
declared by then that it was shifting its HQ to New Delhi,and wanted to lease
some of its floors.Bidders were expected to bid for a minimum floor with the
airline saying that preference would be given to those who planned to occupy
entire floors.Although Air India did not mention the base rental for the
property,it said that higher floors would attract a floor rise of.5 per sq
ft.According to property consultants,an escrow mechanism can be deployed if
lenders finalise the lease transactions with Air India.Under this,lenders who
pick up space through lease will deposit rent in an escrow account and Air
India would pay interest on its loans from the same accounts.Office lease
rentals in Nariman Point,Mumbais central business district,currently hover
around.280-290 per sq ft.Office buildings here are not commanding the same
premium as they did five years ago since most corporates are moving to newer
commercial centers like the Bandra-Kurla Complex.
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