Embassy-Blackstone REIT likely to hit Indian market early next year

Embassy Office Parks, a joint venture between Blackstone and Embassy group, is looking to float the public issue of its real estate investment trust (REIT) early next year, a source has said. This will be the country’s first public issue of REIT.

REITs are like mutual funds, whose units can be traded on exchanges. They are tax-efficient instruments as 90 per cent of profits are distributed as dividends. Market experts were expecting the approvals from Sebi to come around Diwali this year.

“They are hoping to get Sebi clearance by mid-November. Then they will get a short window for roadshows as investors will be travelling during Christmas and year-end holidays. So January is the next best time,” said the source.

On September 24, Embassy Office Parks filed an offer document with capital market regulator Sebi to raise over Rs 50 billion through REIT. “They are not worried about the volatility in equity markets as it is a fixed income product,” said the source. A mail to Embassy group did not elicit any response. Blackstone declined to comment on the matter. The JV has a portfolio of 33 million square feet across Mumbai, Pune, Bengaluru and Noida, 24 million sqft of which is completed and 95 per cent leased.

The annual rental income of the portfolio is over Rs 20 billion and is expected to go up by 50 per cent in the next three years as rentals go up. Blackstone Real Estate has committed to $5.3 billion across 31 investments in India. Of this, $3.9 billion is in office assets; it has invested in more than 100 million sqft of office space.

Last year, Embassy Office Parks registered its REIT with Sebi. Property consultant CBRE is the valuer of the proposed REIT. Sebi had notified REIT's regulations in 2014, allowing setting up and listing of such trusts, which are popular in the western countries, Australia, Japan and others. Real estate developers, such as K Raheja Corp, DLF, RMZ are the probable candidates to float the REIT and these players are keenly watching the success of the Embassy REIT before floating their own REIT, sources said.