Embassy group REIT picks Kotak Mahindra, Morgan Stanley for fundraising

Embassy Office Parks REIT (real estate investment trust) picked Kotak Mahindra Bank and Morgan Stanley to help raise funds for a potential acquisition of commercial property assets in India, according to people familiar with the matter.

The trust selected the banks as advisers, said the people, who asked not to be identified as the discussions are private. There’s no final decision on the size and structure of the financing, which could be a combination of debt and issuance of new units, the people said. The funding needs come as Embassy REIT is evaluating a purchase of its sponsor’s office assets in Bengaluru. Embassy REIT has the “right of first offer” for these assets. Deliberations of the financing are ongoing and they might not lead to a deal, the people said.

A representative for Embassy REIT declined to comment, while representatives for Kotak Mahindra Bank and Morgan Stanley didn’t immediately respond to requests for comments.

Embassy REIT, backed by Blackstone Group LP, in April raised about ~4,750 crore ($667 million) in India’s first such listing. The REIT has gained about 46 per cent since its debut. Its net operating income rose 16 per cent from year ago to ~440 crore in the quarter ended September, with occupancy rate rising to 94.7 per cent.

Last month, the Securities and Exchange Board of India published guidelines on new issuance by REITs, paving the way for potential fund-raising by these trusts. A listed REIT can issue new preferred shares or raise money through an institutional placement after approval from existing shareholders, according to the guidelines. For institutional placement, the minimum listing period has to be 12 months.