Blackstone-Panchshil Realty JV in early-stage talks for REIT IPO

Blackstone, the largest owner of commercial real estate in India and Pune-based luxury property developer Panchshil Realty are evaluating a potential monetization of their joint venture assets via the real estate investment trust (REIT) route, sources with knowledge of the matter told Moneycontrol. If the proposed plan fructifies, it would be a hat-trick of REIT IPOs backed by Blackstone in India. Previously, the US private equity giant has launched the Embassy Office Parks REIT and the Mindspace REIT which it backs along with developer K Raheja Corp.

“These are very early days as structuring and reorganisation of the joint portfolio needs to be done to make it REIT ready, but preliminary discussions have begun for a listing of the commercial assets. There is no clarity yet on the issue size as they are mulling on the assets to be added to the REIT, “ said one of the individuals cited above.

“Panchshil Realty is one of the largest real estate developers in Pune with good assets in strategic locations. In all probability, most of the joint venture assets in Pune may be monetized but to ensure geographical diversification for investors, a few from Mumbai may also be added. This latest REIT offering is likely to be launched in 2021,” said a second individual.

Both the individuals spoke to Moneycontrol on the condition of anonymity. When contacted, Blackstone declined to comment. Moneycontrol is awaiting an email response from Panchshil Realty and its MD Atul Chordia and has sent reminders. This article will be updated as soon as we hear from the firm.

Established in 2002, Panchshil Realty has delivered over 23 million sq. ft. of real estate, with 20 million sq. ft. under development across multi-asset classes.  Its portfolio includes commercial, residential, hospitality , retail and f&b assets in Pune, Mumbai and South Delhi and its clients include the likes of Barclays, Citi, Dell, Deloitte, IBM, TCS, Hyundai, Bajaj Group and others. According to reports, Panchshil Realty and Blackstone jointly own prime office assets like Eon Free Zone
(India’s first notified SEZ in Pune’s Kharadi area ), First International Finance Centre, BKC, Mumbai and the iconic Indian Express Towers in South Mumbai.

The rise of the REIT regime

A real estate investment trust is a company that owns and operates income-producing properties or real estate. Modelled after mutual funds, REITs pool the capital of numerous investors and generate a steady income for their investors. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centres and hotels.

In June 2020,  Blackstone raised around $300 million by selling some of its units in Embassy Office Parks Real Estate Investment Trust (REIT) to show a partial exit to its investors.  Later, on September 30, 2020, Moneycontrol reported that Blackstone's rival Canadian investment giant Brookfield Asset Management had filed documents with market regulator Sebi to raise around Rs 4000-Rs 4500 crore via REIT IPO.

According to experts tracking the segment, the low-interest rate regime, successful listing of earlier REITS, availability of top-notch sponsors, managers and portfolios, flight to safety (income yielding products) during the pandemic, the potential for stable income generation and strong occupancies in the office market are some of the key factors that have made REITs a popular instrument amongst both global and Indian investors.