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Embassy Office Parks REIT
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Offer Details

Embassy Office Parks REIT

Offer Size

Rs. 4750 crore

Offer Open Date

18th March, 2019

Offer Close Date

20th March, 2019*

Lot Size

800 Units and in multiple of 400 units thereafter

Price Band

Rs. 299 – 300

Minimum Bid Amount

Rs. 239,200 – Rs. 240,000

Stock Exchange

NSE & BSE

Sponsor

Embassy Property Developments Private Limited and BRE/ Mauritius Investments

Trustee

Axis Trustee Services Limited

Manager

Embassy Office Parks Management Services Private Limited

 

Units on Offer

 Strategic Investor Portion

    29,208,800 Units aggregating to 87.63 crore, subject to a minimum of 5% and a maximum of 25% of the Issue

Excluding Strategic Investor Portion

Units aggregating up to Rs.3873.7 crore

*The Anchor Investor Bidding Date was one working day prior to the Bid/Issue Opening Date i.e. on 15 March 2019.

Bengaluru-based Embassy Property Developments Pvt Ltd, is planning to raise Rs 4,750 crore from initial public offering (IPO) that opens on Monday, March 18. Launched at 20% discount to NAV, it offers 8.25% yield, to be distributed in the form of dividend and interest in 50:50 ratio. This REIT offering is a joint venture of two well-known companies, US-based private equity firm Blackstone Group and realty developer Embassy Group.

As per company’s DRHP filings, the net proceeds from the issue will be utilised towards the following objectives#

  1. Partial or full repayment or pre-payment of bank/ financial institution debt of certain Asset SPVs and by the Investment Entity
  2. Payment of consideration for acquisition of the Embassy One Assets currently held by EODPL
  3. General purposes

The trust’s portfolio# contains around 33 million square feet of office space across 4 Indian cities, Bengaluru, Pune, Mumbai and Noida. Its portfolio comprises 7 best-in-class office parks and 4 prime city-centre office buildings totalling 32.7 msf as of December 31, 2018, with strategic amenities, including 2 finished and 2 under-construction hotels totalling 1,096 keys, food courts, employee transportation and childcare facilities.

 

  Portfolio as on 31’st December 2018#

 https://trade.adroitfinancial.com/waveibt/files/Marketing%20Mohit/Untitled.png`

 Opportunity:

  1. A successful listing of the REIT, will potentially open a fundraising avenue for India’s cash-starved property companies. The nation’s real estate developers are battling with sluggish sales and price declines that pursued a 2016 crackdown on cash as well as new consumer protection and tax policies. A cash crunch at shadow lenders following defaults at ILFS, likewise shortened accessibility of capital to developers.
  2. Demand from some of the world’s biggest IT companies for high-quality office space means a huge outperformance of commercial realty vis-a-vis residential in the coming years demonstrates strong
  3. Strong management support comprising of Tuhin Parikh building a formidable portfolio for Blackstone in India and Jitu Virwani, CMD of the Embassy Group with Sindhi business astuteness.  Virwani's ability to spot early trends and opportunities and one of his most trusted and experienced lieutenants, Mike Holland, has been appointed CEO to run the REIT.
  4. REITs shall be tax exempt except the interest income received from the SPV and rental income from property owned directly by REITs.
  5. Decent returns in the form of quarterly dividends and capital appreciation being reflected in the form of market value of the listed REIT.
https://trade.adroitfinancial.com/waveibt/files/Marketing%20Mohit/s.png

 

 This IPO comes at a time when the commercial office space segment is upbeat. Office rentals are rising, supply is confined and vacancies are at all-time lows.

Risks:

  1.  If supply of investment-grade office spaces does not keep pace with demand, it will see an asset bubble structure in the short-to-mid-term.
  2.  Since this is the first REIT in India, there is no resord of historical performance of REITs.

Anchor book allocation update: REIT raised Rs. 1,743 crore by allocating units to institutional investors as against its target of Rs. 1750 crore at ₹300 apiece, the upper end of the price band of ₹299-300, according to its stock exchange filings.

Many FIIs and DIIs/Individual investors participated in the anchor book allocation process, as highlighted below:

FII

DII/Individual Investors

  1. TT International
  2. Fidelity International
  3. Schroders
  4. Capital Group

 

  1. Kotak Mahindra Life Insurance Co. Ltd
  2. Family office of Radhakishan Damani, (The promoter of Avenue Supermarts Ltd that runs the D-Mart chain of supermarkets) through trusts, acquired 5.33 million units worth Rs. 160 cr.

 

Short term investors can look for listing capital gains as there is also high interest from FIIs and individual investors. Long term view players can look this REIT investment as an alternative to commercial real estate for annuity income and as an assured return product. Over next 15-20 years, a post tax annuity yield of 7-7.5% is highly likely.

#Source: DRHP filings of Embassy Office parks


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