Embassy Office Parks will on September 24 file the documents with the Securities and Exchange Board of India (Sebi) to launch the country’s first real estate investment trust (REIT). This step comes after government notified rules in this regard four years earlier.
A 2016 Ernst and Young report estimates the global REIT industry at $1.7 trillion. With a successful launch of this one, it would unlock a key source of capital for realtors currently dealing with a cash crunch. It is expected to launch this Diwali.
What are REITs?
- REITs are entities that will own and operate commercial real estate by pooling in money from various stakeholders.
- This is quite similar to mutual funds.
- REITs are traded on stock exchanges.
- Unlike stock investments, long-term investments are expected to earn much higher.
This REIT is the second-biggest commercial real estate listing in Asia in terms of square footage. Its success is also crucial since it would be defining the global investors’ approach towards India’s commercial real estate.
In 2010, global alternative investment management company Blackstone joined hands with Embassy Group to launch Embassy Office Park, in which they hold a 65 per cent and a 20 per cent share, respectively. This coming together of two titans led to a dramatic change that saw global companies rushing to get a pie of India’s commercial real estate ─ media reports say nearly $1 billion has been invested in India’s commercial real estate by global giants since then.
What is the offer?
Embassy Office Parks, a joint venture between US private equity company Blackstone Group and Bengaluru-based realtor Embassy Group, plans to raise over Rs 5,300 crore through the REIT, which was registered in July last year.
Embassy Office Park will list 33 million square foot of commercial space under the REIT spread across cities such as Mumbai, Pune, Bengaluru, Hyderabad, Chennai and Noida which it currently owns and earns Rs 2,000 crore annually as rent. Twenty-four million sqft of this area is complete, with a 95 per cent occupancy rate. More than half of company tenants are Fortune 500 companies, including Google, JP Morgan, Microsoft and Mercedes Benz.