Embassy Office Parks, a joint venture between Bengaluru developer Embassy Group and private equity firm Blackstone Group, will raise Rs 4,750 crore ($682.5 million) from India’s first public offering of a real estate investment trust (REIT) next week.
The Embassy REIT issue is priced at Rs 299-300 per unit. It will open on 18 March and close two days later. The anchor book will open on 15 March, the company said in a public announcement on Wednesday.
Back-of-the-envelope calculation shows Embassy REIT will issue at least 158.33 million units to investors at the upper end of the price band. Institutional investors will be allotted no more than 75% of the units.
Embassy REIT said it will use Rs 3,710 crore for repayment or advance payment—either partially or fully—of debt availed by its special purpose vehicle or investment entity. It will also use Rs 460 crore for acquisition of the Embassy One Assets currently held by group entity Embassy One Developers Pvt. Ltd.
The REIT offering comes just after the US-headquartered financial services giant Capital Group committed to invest Rs 872 crore (around $125 million) as a strategic investor in a pre-listing capital raising exercise.
REITs are investment companies that own, operate or finance income-producing real estate.
As many as 12 merchant banks are managing and arranging the issue. Morgan Stanley India, Kotak Mahindra Capital, JP Morgan India, DSP Merrill Lynch are the global coordinators and book running lead managers.
The REIT is sponsored by Blackstone and Jitu Virwani-led Bengaluru developer Embassy Group. It is also Asia’s largest REIT in terms of portfolio size at 33 million sq ft.
The Embassy REIT is seen as path-breaking as it could set the stage for other developers to tap into the public markets for capital.
The Blackstone-Embassy joint venture was formed in 2012 with an aim to develop office projects. They had filed an application with SEBI to form the REIT in 2016. The REIT was set up in March 2017. It operates in Bengaluru, Pune, Mumbai and Noida.
SEBI had first notified the REIT regulations in 2014. However, few developers showed interest in setting up REITs as investors wanted more measures, including tax breaks. SEBI subsequently modified the regulations several times in a bid to attract investors.