The company is in talks with K Raheja Group for the Trust whose Mindspace IT parks in Hyderabad and Mumbai, could be included in it
Global private equity firm Blackstone Group is in talks with K Raheja Group to set up a Real Estate Investment Trust (Reit) that is expected to have over 2.25 billion square feet of commercial space.
Real estate sources told DNA Money, "Raheja's Mindspace IT parks in Hyderabad and in Mumbai are expected to be a part of the Reit, which is being finalised along with Blackstone's properties."
When contacted, Blackstone declined to comment.
Blackstone is also set to list Reit in collaboration with the Embassy Group of Bangalore. Manyata Business Park, Embassy Golf Links, Vrindavan Tech park are some of the properties that will be included in this Reit. This will also have 2 billion square feet. Embassy Group did not respond to a query sent to them.
New York-based Blackstone has invested about $2.7 billion in real estate projects across India. In 2014, it made news when it acquired the iconic Express Towers in Nariman Point from the Indian Express Group for close to Rs 900 crore.
Besides this, Blackstone has acquired quality office premises from IDFC in Pune and Noida and Oxygen SEZ in Noida. It has also bought one million square feet of L&T Realty's Seawoods project in Navi Mumbai, and also an office park in suburban Mumbai from HCC and IL&FS Milestone Realty.
Recently, the Reserve Bank of India allowed banks to invest into Reits in the first monetary policy announcement unveiled earlier this month. This has sent the stocks of real estate companies soaring.
Reit is a fractional ownership in a property that is already leased. So the income is assured and 90% of the returns have to be distributed to the shareholders. The returns from Reits are expected to be in the range of 12-13%.
Real Estate consultancy firm JLL India estimates that 229 million square feet of office space will qualify to be listed as Reits.
While Blackstone with its joint ventures is expected to be the first mover, other well-known private equity funds like Brookfield, Singapore's GIC and the Canada Pension Plan Investment Board (CPPIB), have also shown interest to list their respective Reits.
The dividend distribution tax was a major obstacle that was putting off potential investors from the Reits. In the 2016 Budget, the Dividend Distribution Tax (DDT) was exempted on special purpose vehicles (SPVs).
"The listing of Reits will help developers unlock the value of the unsold commercial real estate stock that is piled up with them and also help exit from these projects and move to new developments. Investors can also have a fractional ownership in a project for which they get returns specially at a time when bank term deposits and the small savings deposits give only 7% to 8 % returns," said head of a property fund.
In July 2016, the Securities and Exchange Board of India (Sebi) relaxed the rules for Reits and foreign fund managers, to relocate to India. Further, it allowed Reits to invest larger corpus in under construction assets, raising the limit from 10% to 20%. Sebi also proposed to raise the number of Reit sponsors and relaxed norms on clearing third-party transactions.
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