Blackstone, Embassy Group to raise Rs 4,750 cr via Real Estate Investment Trust

Global investment company Blackstone and Bengaluru-based Embassy Group will launch the country's first Real Estate Investment Trust (Reit) today. It plans to raise Rs 4,750 crore for which the subscription will be open later this month.

REIT is an investment tool that owns and operates rent-yielding real estate assets. It allows individual investors to make an investment in this platform and earn income. The Securities and Exchange Board of India (Sebi) had notified Reit's regulations in 2014, allowing it to set up and list such trusts which are popular in some advanced markets.

The REIT has received an Rs 876-crore commitment from strategic investors, who will be allotted 2,92,08,800 units, according to PTI.

According to a regulatory filing, these investors are American Funds Insurance Series, New World Fund INC and SMALLCAP World Fund Inc.

The Reit issue will open on March 18 with a price band of Rs 299-300 per unit. The issue closes on March 20. The total issue size is 12,95,56,000 units.

The real estate investment tool is said to be Asia's largest in terms of portfolio size of 33 million square feet.

In September 2018, Embassy Office Parks had filed the Draft Red Herring Prospectus (DRHP) with Sebi.

Banking sources had earlier said the internal rate of return for unitholders is expected to be around 9% in the first year and about 18% during a five-year period.

Embassy Office Parks, a leading player in the commercial real estate space, has put 33 million sq ft of office and hospitality assets under its proposed Reit comprising of seven business parks and four city-centric buildings spread across Mumbai, Bengaluru, Pune and Noida.

Of the 33 million sq ft, about 24 million sq ft area is operational with 95% occupancy and yielding a rental income of over Rs 2,000 crore annually. While 3 million sq ft area is under construction, another 6 million sq ft area is in pipeline.

Embassy Office Parks' rental income is expected to rise by 55% in the next three years as it looks to lease area at a higher rent.

The JV firm has top MNC clients in its commercial projects. More than 50% of the rents come from Fortune 500 companies. Clients such as Microsoft, Google, Wells Fargo and JP Morgan have their base in the office parks.

Unlike the housing segment, the commercial real estate sector is doing well and attracting huge investments from domestic and global investment firms. Rising demand for co-working space is also fueling demand for office properties.

GROUND WORK DONE

• Rs 299-300 – per unit price band of Reit issue
   
• 12.95 cr – units total issue size
   
• 33 million – square feet office and hospitality assets of JV