1st REIT launched in India by Embassy Office Parks, to raise Rs 4,750 cr

Chennai: Embassy Office Parks REIT, a joint venture between the Bengaluru-based Embassy Group and private equity firm Blackstone, India’s first real estate investment trust, will hit capital markets on 18 March with its initial public offer (IPO) to raise about Rs 4,750 crore from public.

IPO of the REIT fund is priced in a band of Rs 299 to Rs 300 per unit. The IPO will be open for three days through 30 March, state reports.

Embassy Office Parks REIT it holds around 33 million square feet of commercial office comprising seven business parks and four city-centric buildings in Mumbai, Bengaluru, Pune and Noida.

Investors can earn around 8.25 per cent (indicative yield) per annum by investing in this REIT. Embassy REIT reported a net profit of Rs 260 crore for the financial year 2017-18, up from Rs 177 crore in FY17.

REIT funds earn their income through rentals or capital gains or both. And minimum 90 per cent of the income (net distributable cash flow) should be distributed to investors at least on a half-yearly basis, according to SEBI rules.

Through this IPO, promoters of the fund are selling 10 per cent stake to the public. Proceeds of the fund will be used to repay debt and acquire the Embassy One assets in Bengaluru, currently held by Embassy One Developer.

The issue is made through a book-building process wherein 75 per cent of the issue, excluding the strategic investor’s portion, will be allotted to institutional investors and 25 per cent to non-institutional investors.

An investor has to apply for a minimum lot of 800 units and in multiples of 400 thereafter which implies, one has to invest minimum amount of Rs 2.40 lakh to apply shares of Embassy Office Parks REIT. Once the IPO is listed, trading will be done for a minimum lot of Rs 1 lakh.

Although REITs are new to India, globally they have been providing an attractive return to investors based on their yield, which is determined by dividend distribution and capital appreciation of the underlying asset.

According to reports, the REIT fund has already raised Rs 872 crore from institutional investors like Capital Group, American Funds Insurance Series, New World Fund and Smallcap World Fund as a pre-listing fundraising exercise.

What is a REIT?
REIT is an investment tool that owns and operates rent-yielding real estate assets. It allows individual investors to invest using 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.

REITs are listed entities that invest in income-generating properties and distribute at least 90 per cent of their income proceeds to unit-holders through dividends. After registration with SEBI, units of REITs will have to be mandatorily listed on exchanges and traded like securities.