Trikona Capital's New Investment In Bandra

Trikona Capital has announced a $40 million deal for the urban rejuvenation (redevelopment) of a 4 acre property in Bandra, Mumbai. Highlights

1. The deal is a co-investment with SachsenFonds
2. Development partner is Keystone Constructions (Rustomjee), a company with whom Trikona has invested previously also.
   
3. SachsenFonds has previously bought $170 million of assets from Trinity Capital, an AIM listed fund managed by Trikona Capital.

Trikona Capital has been among the first few real estate private equity firms in the country. They sport a wider mix of property types than other firms with investments ranging from Fortis Hospitals and Pipavav Port to hotels, office parks and residential townships.

Their sale of assets to SachsenFonds is the first real-estate private equity exit that comes to mind. The cash-on-cash return on those transactions was north of 100%. While the exit is commendable, one cannot help but think that the exit was partly driven by fine-print in the agreement between Trikona and Trinity. Trikona (the manager) gets paid a performance fee on a project basis and not at an aggregate fund level. In addition, as mentioned in Page 78 of the prospectus, there is no clawback feature for the payment of the performance fee. So, if there are two very-profitable projects and two not-so-profitable projects, the investor may not make returns in excess of the 10% hurdle rate, but the manager rakes in a fee on the two very-profitable projects. It is also pertinent to remember that the percentage of the performance fee increases from 20% to 30% if the IRR is more than 30%. Given that the investment was less than 2 years old and the cash-on-cash returns were more than 100%, the sale to SachsenFonds is likely to have generated a large performance fee for Trikona Capital.