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Embassy Group rejigs property portfolio ahead of REIT listing: Report

The revised REIT will include assets operated by partner Blackstone in the National Capital Region (NCR) and Mumbai

Embassy Office Parks is planning to combine its top commercial assets across the country under a real estate investment trust (REIT) that it is creating to raise $1 billion, even as partner KJ George decided to not participate in the trust.

According to a report by Mint, the initial REIT proposal only included the company's properties in Bengaluru and Pune, which were developed by parent Embassy Group in partnership with Blackstone Group LP and other investors.

Embassy Office Parks' revised REIT will include assets operated by partner Blackstone in the National Capital Region (NCR) and Mumbai. If the proposal were to go through, Blackstone's stake in the REIT would be significantly higher.

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A REIT is a company that owns, finances, or operates real estate that generates income.

George, who owns a 50 percent stake in Embassy Golf Links in Bengaluru, is a minister in the Karnataka government. His reluctance to participate in the REIT implies that Embassy Group, which owns the remainder of the stake in the 4.5 million sq ft office space, will put up only its share for listing.

However, Embassy is not placing all its eggs in one basket. A source contacted by the news daily said that Embassy Tech Village in Bengaluru, which spans 6 million sq ft, will be excluded from the portfolio to provide for a stronger rent-generating property mix for the parent company.

The application to list the REIT is likely to be filed this month. The board of Embassy Office Parks is scheduled to meet this week to discuss and approve the proposal.

The REIT portfolio will include Blackstone's assets as well as those jointly operated by Embassy-Blackstone. The total valuation of the enterprise is around Rs 30,000 crore, of which up to Rs 7,000 crore will be raised by taking on debt.

Some of the properties that will be a part of the REIT include Express Towers and 247 Park in Mumbai, Embassy Manyata Business Park and a Four Seasons hotel in Bengaluru, Oxygen SEZ and Galaxy IT Park in NCR, and Quadron, Blueridge and Embassy Tech Zone in Pune.

The deal also spells good news for partners of the two major stakeholders. Property developer Panchshil Realty, which partners Blackstone, will get a share of REIT units in lieu of its stake in Express Towers located at Mumbai's Nariman Point.

Embassy Office Parks has the distinction of being the first REIT to be registered with the Securities and Exchange Board of India (SEBI), having received regulatory approval in July 2017.

The valuation of the Embassy-Blackstone REIT listing will depend on the rental yield, and how the combine can manage a geographically diverse portfolio.

REITs are financial instruments which allow investment in office and commercial spaces and generate income through the sale or lease of finished properties to clients.

SEBI notified norms for infrastructure investment trusts (InvITs) and REITs in September 2014. Subsequently, it has tweaked the rules to spur investment in a segment which operates akin to mutual funds in real estate.

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First Published on Aug 6, 2018 12:37 pm
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