This story is from June 15, 2018

Blackstone, Embassy eye $1billion in country’s first REIT listing

India’s first real estate investment trust (REIT) listing is poised to kick off with the world’s largest private equity investor Blackstone and commercial developer Embassy Group ready to move markets regulator Sebi to raise as much as $1 billion, people directly aware of the matter said.
Blackstone, Embassy eye $1billion in country’s first REIT listing
(Photo by Reuters)
BENGALURU: India’s first real estate investment trust (REIT) listing is poised to kick off with the world’s largest private equity investor Blackstone and commercial developer Embassy Group ready to move markets regulator Sebi to raise as much as $1 billion, people directly aware of the matter said.
Bengaluru-headquartered Embassy Office Parks, which owns 24 million sqft of leased office spaces across cities, is expected to debut with a market value of $4-5 billion.
The company’s listing, which has been in the making for past two years, is being keenly watched, especially after the subdued arrival of InvITs or Infrastructure Investment Trusts on Indian exchanges.
Blackstone owns around 43, while billionaire Jitu Virwani-led Embassy, which manages the trust, holds 25 per cent interest. The land owners of some of the country’s biggest technology parks are said to own the remaining 32 per cent. The assets held under the REIT have a net operating income of just under Rs 2,200 crore annually.
The listing potentially marks the coming of age for India’s rent-yielding grade-A office market, which expanded rapidly in the last decade, riding on the services sector in the fastest growing major economy globally. Blackstone and Embassy declined to comment on this report.
Blackstone, Embassy eye $1bn in country’s first REIT listing

Embassy Office Parks, which had earlier sought regulator approval as a REIT, is expected to file the final papers by early July. Morgan Stanley and JM Financial are the lead banks advising on the listing that is expected before end-September. REITs operate income-generating real-estate assets, earnings from which are distributed to shareholders. These trusts usually provide small- and large-unit holders an inflation-indexed stock market instrument.

Sources cited earlier said the REIT was expected to raise anywhere between $750 million and $1 billion after “roadshows suggested institutional investor enthusiasm”. The proceeds from the listing will be used to retire debt estimated at over Rs 6,000 crore, or $900 million.
Embassy and Blackstone are seen pushing for capitalisation rate, or cap rate — which is property market parlance for annual investor return — in the range of 7.5 per cent to 8 per cent, translating into a market value in excess of $4 billion. A compressed cap rate suggests market buoyancy, which results in a higher market value. Incidentally, there are worries that the REIT is hitting the market in an inflationary economy with hardening interest rates.
JLL India executive managing director Juggy Marwaha said, “Timing maybe a little off considering the rising interest rates. But the asset quality, along with rising rents and all-time low vacancy rates, make this REIT an attractive opportunity for investors.”
The country’s rented office parks — in Bengaluru, Pune, Navi Mumbai and NCR in particular — ride on marquee global clients in technology and financial services sectors, among others. A person privy to the investor meetings said, “Investors in REITs look for stable 7-8 per cent returns with reasonable annual appreciation. A REIT with diverse and quality tenants, with scope for an uptick in rentals, is seen attractive despite deteriorating global macros.”
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