Lemon Tree Hotels and Warburg Pincus Enter into a JV to Form a Co-Living Platform

Joint equity investment of Rs. 3, 000 Crore over a period of time to develop high quality | full service accommodation for students and young working professionals

Deepthi | Myequity news | Date : 27-12-2018 17:59:00 IST

Lemon Tree Hotels, India's largest hotel chain in the mid-priced sector has formed a JV with an affiliate of Warburg Pincus, a leading global private equity firm focused on growth investing, to create a co-living platform. The JV marks Lemon Tree Hotel's entry into an adjacent but new business segment focusing on the development of institutional-grade rental housing  accommodation serving both students and young working professionals across major educational clusters and key office markets in India. This investment represents the first co-living platform which the firm has backed in India. An affiliate of Warburg Pincus and Lemon Tree Hotels Limited will hold 68% and 30% stake, respectively in the JV, with the balance 2% to be held by Mr. Patanjali Keswani.

The JV partners will initially invest Rs. 1,500 Crore in equity over a period of time followed by an additional infusion of Rs, 1,500 Crore in equity at the option of the partners, to develop rental housing projects through a combination of greenfield purpose-built properties, refurbishment of existing under-managed/stressed commercial and residential assets taken on lease/acquisition basis as well as management of existing for rent accommodation projects. The platform aims to provide affordable and conveniently located co-living spaces for students and young professionals, who are increasingly looking to be part of a vibrant community with like-minded individuals. The JV's projects will also include shared spaces like living room, gym and well-equipped cafeterias in order to provide its residents with a high-quality and full-service co-living accommodation.

The JV has developed a pan-India strategy and is building a dedicated team to execute its plan, making it one of the very few players with a combined focus across student housing and young professional co-living segments, while undertaking customized developments to meet the evolving needs of the millennial population in India.

Commenting on the formation of the JV, Patanjali (Patu) Keswani, Founder, Chairman and Managing Director, Lemon Tree Hotels Limited, said, “We are delighted to once again partner with Warburg Pincus at an early stage of this exciting new business opportunity, which will allow Lemon Tree Hotels to move into a segment which is nascent but closely aligned to our existing target customers and which is expected to see tremendous growth, going forward. Driven by the lack of quality accommodation and high rental/capital costs across key Indian cities relative to salary levels, the rise of co-living spaces is a part of the evolution of the sharing economy that will continue to gain significant traction. Our purpose—built developments will offer efficient and community-oriented living solutions in a hassle-free environment for our residents through a combination of unique product design and diversified service offerings. We look forward to working closely with Warburg Pincus and leveraging their successful experience in helping create market leading platforms in the shared accommodation space in other parts of Asia.”

Anish Saraf, Managing Director, Warburg Pincus said: "India has a large addressable rental population across students and young professionals which is expected to grow significantly as a result of rapid urbanization, increasingly unaffordable housing prices/rentals and shortage of on-campus housing infrastructure. Moreover, this millennial population desires modern housing facilities with a sense of community living, which is missing in existing accommodation offerings We are excited to partner for a second time with Patu and his team and believe that this JV is well-positioned to become a leading for-rent accommodation provider in India, given its access to significant capital as well as support from Lemon Tree Hotel’s proven design/development capability and existing on-ground infrastructure across the country, We look forward to working with Lemon Tree Hotels to build a best-in-class team and scale-up the platform as well as build a strong consumer brand in the Indian co-living space."

About Lemon Tree Hotels Limited

Lemon Tree Hotels Limited (LTH) is India's largest hotel chain in the mid-priced sector, and the third largest overall, on the basis of controlling interest in owned and leased rooms, as of June 30, 2017 according to the Horwath Report. LTH operates in the mid-priced hotel sector, consisting of the upper midscale, midscale and economy hotel segments and seeks to cater to Indian middle class guests and deliver differentiated yet superior service offerings, with a value-for-money proposition. Lemon Tree hotels are located across India, in metro regions, including the NCR, Bengaluru, Hyderabad and Chennai, as well as tier I and tier II cities such as Pune, Ahmedabad, Chandigarh, Jaipur, Indore and Aurangabad. New hotels will open shortly in Mumbai, Kolkata and Udaipur.

About Warburg Pincus

Warburg Pincus LLC is a leading global private equity firm focused on growth investing; the firm has more than USD 47 billion in assets under management. The firm's active portfolio of more than 170 companies is highly diversified by stage, sector and geography. Founded in 1966, Warburg Pincus has raised 17 private equity funds, which have invested more than USD 68 billion in over 825 companies in more than 40 countries. The firm is headquartered in New York with offices in Amsterdam, Beijing, Frankfurt, Hong Kong, Houston, London, Luxembourg, Mumbai, Mauritius, San Francisco, Sao Paulo and Shanghai. Warburg Pincus has a proven track record as an experienced and successful investor in the real estate sector across the region.

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