Embassy Office Parks to file Reit document this month; could mop up $1 bn

Embassy Office Parks, the joint venture between Bengaluru-based Embassy group and US-based private equity fund manager Blackstone, is looking to file offer document for its real estate investment trust (Reit) in a week or two, said sources in the know. The maiden Reit offering in India could raise as much as $1 billion.

“The bankers are giving the final touches to the offer documents,” said the source. An email sent to the Embassy group did not elicit a response.

A Reit allows investors to take ownership in a yield-generating commercial real estate properties, such as office buildings or shopping malls. A Reit has to distribute 90 per cent of profits as dividends.

According to sources, the partners have decided to keep the Pune assets of both Embassy and Blackstone in the Reit. Blackstone owns the BlueRidge special economic zone (SEZ) and another SEZ at Hinjewadi in Pune. Embassy owns Embassy TechZone in the city.

In July 2017, the Embassy Office Parks Reit was registered with the Securities and Exchange Board of India (Sebi). Blackstone is also bringing its assets, such as 247 Park and Express Towers in Mumbai under the Reit, reports said recently.

Another Blackstone partner, Panchshil Realty, which holds a stake in Express Towers, will get a share of Reit units once the listing happens, reports said.

Embassy Office Parks has the single-largest private office park portfolio in the country, spread across 33 million sq ft of operational business parks and 13 million sq ft, the company says on its website. It operates business parks in Bengaluru, Pune, Mumbai and the National Capital Region and has development underway in Chennai, Thiruvananthapuram and Hyderabad. 

ASSET MANAGEMENT

* The JV has portfolio of 33 million sq ft of operational business parks 

* It operates properties in Bengaluru, Pune, Mumbai, and NCR 

* JV owns Embassy Golf Links, Embassy Manyata, Embassy Tech Village in Bengaluru

Source: Company

Embassy Office Parks owns Embassy Golf Links, Embassy Manyata, Embassy Tech Village in Bengaluru; and Embassy Taurus Techzone in Thiruvananthapuram.

According to experts, the success of the Embassy Reit could set the stage for more such issuances. Some of the companies that are looking at Reits issuances include DLF, K Raheja Corp and RMZ.

Sunil Khaitan, India head, global capital markets, Bank of America Merrill Lynch said real estate is an under-owned sector among Indian investors and a Reit issuance would be a big positive for the market

“Investors in Reits or infrastructure investment trusts (InvITs) typically value cash flows and growth together. Given that India is primarily a growth-bias market, one can sell these deals (Reit or Invits) on a total returns basis that’s dividend yield plus growth. This means, a certain amount of capital will come back in the form of dividend while there would be a growth of 8-10 per cent in these assets. That is why, only stable, high cash flow yielding asset are put into a Reit because, it needs to give out about 90 per cent of cash flows as dividends to investors. That is why, Reits from credible names would definitely be successful in India,” said Khaitan.

The country’s first Reit issuance will take place more than a year after the domestic market saw its first InvIT issuances. An InvIT is similar to a Reit but has infrastructure projects, such as roads or power plant, as underlying assets.

Last April, IRB Infrastructure Developers launched India’s first InvIT. A month later, Sterlite Power launched India Grid InvIT. Both the issuances haven’t done too well as far as the secondary market performance is concerned. IRB InvIT Fund currently trades at Rs 76.7 against the issuance price of Rs 102. Meanwhile, India Grid Trust is trading at Rs 92.75 against the issue price of Rs 100. So far, India Grid has paid dividend of Rs 3.92 per unit, while IRB InvIT has paid Rs 12.5 per unit.