Indian Hotels, after two years of speculation, is finally acquiring the Lokhandwala-owned Regent Mumbai and has already taken over its operations.

Indian Hotels has acquired the property at approximately Rs 80 lakh a room (including FSI Value) compared with other luxury projects costing more than Rs 1.30 crore a room.

The effective cost of acquisition is Rs 415 crore or Rs 80 lakh a room, which is 40 per cent less than the replacement cost of an equivalent property.

The group will restructure the top four floors of the property, renamed as Taj Lands End, into service apartments and a retail complex.

Following the buyout, Indian Hotels is planning to sell its about 17 acres of land in North Mumbai at the present market price.

R K Krishna Kumar, managing director, said, "We have been targeting an acquisition in north Mumbai for sometime to complete our segment presence in India’s commercial capital. We have done this without adding new room supply in north Mumbai. Additionally, it will enable us to divest ownership of large tracts of land in north Mumbai, which have been acquired in the past for building up a hotel.".

Taj has also acquired 19.9 per cent equity interest in Lokhandwala Hotels Private Ltd (LHL) for Rs 24 crore, while the balance stake has been acquired by the ICICI Trustee Services for Rs 95 crore.

The Taj can acquire the balance equity over the next four years. The investment return applicable for acquisition is 12.25 per cent. The Indian Hotels Company will operate the hotel under a license agreement for 
15 years.

The consortium of lenders to LHL, lead by ICICI, IDBI, have re-structured their loan package to the new entity.

The debt of Rs 331 crore has also been restructured. Of which, Rs 81 crore of debt is interest free for 27 months and Rs 47 crore of debt is interest free for 31 months.

North Mumbai is the fastest growing market and the number of hotel rooms projected to grow from 2,150 to 3,575 in three years, Zubin Dubash, executive director-finance said. Taj acquired this hotel at below replacement cost, Dubash added.