Red Fort Capital mulls Reit for its assets

International private equity fund Red Fort Capital, focused on the Indian real estate, is exploring options to bring all its investments in office properties under a real estate investment trust (Reit) and list it, said an executive privy to the discussions.

Red Fort Capital holds significant stakes in two office complexes - Red Fort Towers in New Delhi and Exora Business Park in Bangalore - and the right of first refusal in two of the other properties, the executive added.

The firm, which manages funds worth $1 billion, is also exploring other options such as floating a Reit in the US or Singapore, the executive said.

Reits are pooled investment vehicles that can be used to invest in real estate. They are tax-efficient as they distribute 90 per cent of their income to investors.

The fund manager's plans comes after the Indian government gave "pass-through status" for such instruments and the markets regulator is in the process of finalising the final regulations for them, the executive revealed.

"They will float a Reit wherever they get maximum value for investors," said the executive.

When contacted, Parry Singh, co-founder and senior managing director at Red Fort Capital, said: "We do have significant commercial assets; we invest for the long-term. We will decide in due course based on regulators updates."

Besides Red Fort, big real estate investors such as Blackstone are also looking to float real estate investment trusts in India. Blackstone, which has joint venture with Bangalore-based Embassy group (the two companies together have a portfolio of 20 million sq ft), is also looking at floating a Reit.

According to Jones Lang LaSalle, India has 375-million sq ft Grade A office stock, out of which 80-100 million sq ft can be converted into Reit that generate total rentals of Rs 6,000 crore and capital value of Rs 60,000-75,000 crore.

Many developers/investors are not happy with tax regulations surrounding Reits as they need to pay long-term capital gains tax on sale of units.