Embassy expects to raise Rs50 b through India's first REIT listing

Embassy Office Parks, a joint venture between Bangalore-based real estate developer Embassy Group and private equity giant Blackstone Group, expects to raise Rs50 billion through India's first real estate investment trust (REIT) listing.
Jitu Virwani, chairman of Embassy Group, said the move marks the next phase of growth for India's realty sector by offering a platform for all categories of investors to make safe and rewarding investments into the vibrant Indian real estate market.
The Embassy-Blackstone joint venture - which filed before the Securities and Exchange Board of India an application for in-principle approval to register a REIT, the first by a developer in India - plans to list some of its select assets through the REIT route, ?Virwani told Khaleej Times.
He said Embassy Group has been evaluating various capital raising options from time to time to meet its growth objectives. "The REIT will allow us to disinvest a stake in its office rental portfolio and unlock capital."
The joint venture, which was formed in 2012, has a portfolio including Embassy Golf Links, Embassy Manyata Business Park, Embassy TechVillage and Embassy TechZone. Through REITS, Embassy along with its partner seeks to monetise around 27 million square feet of income-generating commercial real estate that they collectively own. The billionaire developer said the introduction of REIT could pave the way to boost India's broader market for properties. As in the United States where REIT was created in the 1960s, and other developed markets, the REIT will be a significant conduit for global and domestic investment into India's real estate. Real estate pundits said the best thing about REIT is that investors can start with as small a sum as 200,000 rupees to secure units in exchange.
According to research firm JLL India, other funds and developers including Phoenix, Brookfield, DLF and Raheja are expected to launch REITs with the first REIT listing expected only in the first half of 2017.
The Embassy Group has so far developed 37 million sq ft of commercial, residential, retail, hospitality and industrial spaces and holds an extensive land bank of 1,700 acres across the country. Its operations spans across Indian and international markets such as Bangalore, Chennai, Pune, Coimbatore, Malaysia and Serbia in Eastern Europe. On the commercial front, the group has delivered 28 million sq ft of income generating properties.
Virwani, who recently bought a stake in MAC Charles, which owned Le Meridien Bengaluru, is also expanding his hospitality business, which includes partnership with Hilton as well as the Four Seasons Branded Residences.
He said the group's strategy is to differentiate from other realty players by enhancing the value of by providing F&B hubs and hotels across all business parks going forward. He believes India's hospitality sector in Bengaluru is booming with a high demand for luxury hotels in Bengaluru, which has doubled its supply in the last five years.
The city has grown both occupancy and ADR (average daily rate) and witnessed 15 per cent growth in RevPAR (revenue per available room) in 2015-16 over 2014-15, the highest in the country, reflecting the strong demand fundamentals in the city.
On the group's future growth roadmap, Virwani sounded upbeat and expects to sustain growth in all business verticals.
He said in the commercial office sector, while information technology enabled services sector would continue to lead the market when it comes to leased spaces, followed by the BFSI (banking, financial services and insurance) and consulting sectors, the growth in e-commerce has caused a spike in demand for large warehousing and distribution spaces resulting in reducing vacancies and increasing rents.
Embassy Property Developments Private Limited, which commenced operations in 1993, together with its promoters has around 30 years of experience in real estate development. Ongoing residential projects include luxury apartments and integrated townships.
Embassy's vision for the future is to leverage its tenant relationships and expand the portfolio of Information Technology space throughout India and internationally, besides focusing on developing residential and retail spaces. - issacjohn@khaleejtimes.com