Citi Property, JPMorgan initiate arbitration BPTP after time-bound exit failed

Track2Realty-Agencies: Two private equity funds, Citi Property Investors and JPMorgan Chase, have initiated separate arbitration proceedings against BPTP on the grounds that it has failed to provide a time-bound exit for their respective investments in the company.

The two global funds have alleged a breach of contract on the part of BPTP, which was to implement an Initial Public Offering (IPO) by July 8, 2011, sources said requesting anonymity.

According to these insiders, arbitrators have been appointed and proceedings are expected to begin shortly in the two cases. Citi Property Investors, which was bought by Apollo Global Management from Citigroup in 2010, had invested Rs.322.5 crore for a 5.89% stake in the company in 2007.

Harbour Victoria Investment Holdings, a part of JPMorgan Chase & Co group of companies had picked up 6.21% stake in the company for around Rs.260 crore in 2008-2009.

Both deals happened when BPTP was emerging as a key player in and around Delhi, acquiring marquee land parcels for record prices. According to the original terms of the agreement, BPTP offered the investors an exit through an IPO.

Though BPTP got a nod from the Securities and Exchange Board of India, the stock market regulator, for a 1,500-crore IPO in May 2010, it decided to defer it, like many other developers at the time, due to uncertain market conditions.

Citi Property India recently filed a petition in the Delhi High Court and has sought arbitration under Section 9 of the Arbitration and Conciliation Act. The court gave an interim order asking BPTP to provide securities in the form of unencumbered properties against CPI’s investment and the case is still ongoing. It also asked BPTP not to sell, alienate or otherwise encumber any of the ‘selected projects’ till the next date.

In the case of JPMorgan, the agreement with BPTP included a put option agreement, whereby the investor will get an exit through promoter buyback of shares at a fixed rate of return if the IPO did not happen.