MUMBAI | BENGALURU: Blackstone and Embassy Group’s Real Estate Investment Trust is expected to see over 50% cumulative rise in rental income over the next three years, two persons familiar with the development said. On Monday, Blackstone and Embassy’s joint entity Embassy Office Parks filed papers with the Securities & Exchange Board of India (Sebi) for the proposed over Rs 5,000-crore REIT. This will be India’s maiden REIT issue.
Embassy Office Parks now earns annual lease rentals of over Rs 2,000 crore from tenants including Google, JP Morgan, Microsoft, Cisco, IBM, Wells Fargo and Mercedes Benz. It counts more than 150 tenants, over half of which are Fortune 500 companies.
Embassy Office Parks is listing 33 million sq ft office real estate portfolio under the REIT. Of this, an area of 24 million sq. ft. has been completed and has 95% occupancy. The remainder is under construction.
“Of the 24 million sq ft, over 3 million sq ft office space is coming up for renewal over the next three years in a steady phase. The revised rentals will be commensurate with the current market rates,” said one of the persons mentioned above.
Blackstone and Embassy declined to comment for the story. ET has learnt that the board of directors of the REIT comprises of two representatives of Blackstone and Embassy each apart from four independent directors. The independent directors include Punita Kumar-Sinha, managing partner at Pacific Paradigm Advisors, Ranjan Pai, CEO & MD of Manipal Group, Anuj Puri of ANAROCK Property Consultants and Vivek Mehra, former partner at PwC.
Chris Heady, senior managing director & head of real estate, Blackstone Asia and Tuhin Parikh, senior managing director, real estate at Blackstone India will represent the private equity major on the REIT’s board, while Embassy will be represented by Jitu Virwani and Aditya Virwani.
The REIT portfolio is expected to yield 8% in the third year from listing once the entire portfolio is stabilised while returns are expected to be 13-15%, experts said. The listing is expected to be concluded by the end of this financial year.
“The proposed REIT indicates the Indian real estate is moving closer to maturity and the quality of assets in the first issue is superior. Given the robust demand for commercial spaces and expected rental escalations, the returns are also expected to be good,” said Shishir Baijal, chairman & managing director, Knight Frank India. The REIT, registered in 2017 as Embassy Office Parks, is sponsored by Blackstone and Embassy Property Developments. The lead banker to the issue is Morgan Stanley followed by JP Morgan, Kotak Mahindra and Bank of America Merrill Lynch.