Blackstone-Embassy to launch India's first REIT on Mar 18 to raise up to Rs 4,750 cr

New Delhi: Global investment company Blackstone and realty firm Embassy will hit the capital market with the country's first real estate investment trust (REIT) to raise up to Rs 4,750 crore, while it has received Rs 876-crore commitment from strategic investors.

Embassy Office Parks, joint venture of Blackstone and Embassy, has entered into unit subscription agreements with strategic investors to allot them 2,92,08,800 units for Rs 876.3 crore.

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

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.

Embassy Office Parks had in September last year filed the draft red herring prospectus (DRHP) with market regulator Sebi to launch REIT, touted as Asia's largest in terms of portfolio size of 33 million sq ft.

REIT is an investment tool that owns and operates rent-yielding real estate assets. It allows individual investors to make investment in this platform and earn income. Sebi had notified REIT's regulations in 2014, allowing setting up and listing of such trusts, which are popular in some advanced markets.

"We will launch our REIT in few weeks," Embassy Office Parks CEO Mike Holland had told PTI on February 24.

"We already have a strong book of anchor and strategic investors. The REIT will be successful as in other countries and Embassy Office Parks will set a precedent for the REIT in India," he had said.

Banking sources had earlier said the internal rate of return (IRR) for unit holders is expected at around 9 percent in the first year and about 18 percent in a five-year horizon.

Embassy Office Parks, a leading player in commercial real estate, 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.

Out of the 33 million sq ft, about 24 million sq ft area is operational at 95 percent occupancy and yielding rental income of over Rs 2,000 crore annually. Another 3 million sq ft area is under construction and 6 million sq ft area in pipeline.

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

The JV firm has top MNC clients in its commercial projects. More than 50 percent of the rents come from Fortune 500 companies. Clients such as Microsoft, Google, Wells Fargo and JPMorgan 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 fuelling demand for office properties.