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India’s first Real Estate Investment Trust: Blackstone, Embassy’s Rs 4,750-cr REIT issue this week

Subhajit Dasgupta
real estate, real estate sector, real estate industry

Embassy Office Parks, a joint venture of Blackstone and realty firm Embassy, which is launching India s first real estate investment trust (REIT) next week, also proposed to raise Rs 4,000 crore via non-convertible bonds to partly meet its construction finance requirements. The firm is raising Rs 4,750 crore through REIT issue, comprising of 12,95,56,000 units. The REIT issue will open on March 18 with a price band of Rs299-300 per unit. The issue closes on March 20.

The joint venture firm has already entered into unit subscription agreements with strategic investors like American Funds Insurance Series, New World Fund and Smallcap World Fund to allot them 2,92,08,800 units for Rs 876.3 crore.

Post the REIT issue, we plan to raise Rs 4,000 crore through debt financing which would be used for repayment of debt as well as for construction financing and working capital requirements at asset SPVs, Embassy Office Parks Management Services deputy CEO and COO Vikaash Khdloya said.

However, he did not disclose the timeframe for issuing the bonds.

Embassy Office Parks had in September last year filed the draft red herring prospectus (DRHP) with market regulator Sebi to launch REIT having a portfolio size of 33 million sq ft 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% 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.

We will also be looking at expanding the REIT portfolio. We are considering the assets of Embassy which are under development for acquisition. But there is no obligation to buy from the sponsor. We may also go out in the market and buy projects. Such acquisitions can happen either by increasing debt or swap for units in trust, Embassy Office Parks CEO Michael Holland said.
He further said that nearly 500 million sq ft of Grade A office space is available in the country.

Also, due to consolidation, we think there is opportunity for strategic acquisitions in the coming future, he added.

On the utilisation of the proceeds of the REIT issue, Khdloya said that nearly Rs 3,700 crore out of the Rs 4,700-crore issue would be used for repaying the debt which is over Rs 8,400 crore.

Around Rs 460 crore from the proceeds will be utilised for acquiring one of the assets from the sponsor Embassy One , while the remaining funds would be used for general corporate purposes, he added.

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

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