Blackstone, Embassy pad up to launch first REIT, raise Rs 4k cr

Draft prospectus to be filed next week; second trust, with Panchshil, in a few months

Blackstone, one of the largest investors in the world, is likely to file a draft prospectus next week, along with its partner, Bengaluru-based Embassy Group, for a real estate trust (REIT).

"We are filing for a REIT next week. We are looking to raise $600 million (about Rs 4,000 crore)," said Jitu Virvani, chairman, Embassy Group.

This would be the first REIT in the country, after the capital markets regulator, the Securities and Exchange Board of India (Sebi), relaxed norms on Friday.

Blackstone is already planning a second such trust with another partner - Pune-based Panchshil.

The Embassy Office Parks, the joint venture (JV) between Blackstone and Embassy, has an office portfolio of 35 million square feet, valued at $3 billion (about Rs 20,000 crore), Virvani said.

"We will have a con-call with Blackstone and then move ahead," he said, adding they were looking to divest between 20 per cent and 25 per cent in the issue.

Blackstone said it would not comment on the matter.

The JV, with office properties such as Embassy Manyata, Embassy Tech Village and others, has already appointed US-based Morgan Stanley as bankers. It is in talks with Kotak Mahindra Capital and Goldman Sachs as well to serve as bankers, according to Virvani.

Blackstone's other joint venture with Panchshil plans to file papers for a REIT in the next three to four months, said Atul Chordia, chairman, Panchshil Realty.

Panchshil has a portfolio of 11 million square feet, which is valued at over $1 billion (Rs 6,800 crore), sources said.

The JV has properties such as iconic the Express Towers in Mumbai, Eon Free Zone in Pune and others.

Chordia said they have appointed Morgan Stanley as the banker for the issue.

"Blackstone's southern assets are parked under the Embassy JV, and assets in west are grouped under Panchshil," said a source.

Ajay Jain, executive director, investment banking, and head, real estate group, at Centrum Capital, said the commercial players were keenly watching the space.

"This move will certainly result in more such assets coming under one umbrella,'' Jain said. "Also this could prompt developers to focus on commercial project execution and private equity funds to invest in the commercial space."

DLF, the country's largest developer, said it would go for a REIT in the current financial year (2016-17).

It is planning to raise $2 billion (Rs 13,600 crore) from a REIT and plans to use the proceeds towards debt repayment.

DLF's REIT issue is expected to hit the market after the stake sale by its promoters in the company's rental arm.

RMZ, a Bengaluru-based developer backed by Qatar Investment Authority, is also planning to file for a REIT by March 2017.

Currently, about 229 million sq ft of office space in India was REIT-compliant, and assuming even 50 per cent of these get listed, the country could look at a total REITs listing worth $18.5 billion (about Rs 1.25 lakh), JLL India Chairman Anuj Puri had said earlier.

Blackstone has invested $6 billion (about Rs 40,800 crore) in Indian private equity and real estate, of which $3 billion (about Rs 20,400 crore) is in real estate alone. It is also building mall assets portfolio where it has four malls. According to sources, it would also list its mall portfolio as REIT in the future.