Blackstone group and K Raheja Corp are set to make its commercial portfolio public through the listing of a REIT.

By Abhay Shah, Realty Quarter

American private equity major Blackstone Group along with K Raheja Corp builder are expected to pull their jointly owned 20 million sq ft commercial portfolio to the public by March, by listing of Real Estate Investment Trust (REIT), said two individuals with direct knowledge of the development.

It’s the second REIT for the country, after listing the Embassy Office Parks, a joint undertaking between Blackstone and the Embassy Group, at the start of this year.

At least six investment banking partners are essentially being recruited, for both Blackstone and K Raheja Corp for the proposed issue which will be started by March. Morgan Stanley has already roped in of the six bankers, and the rest will probably be hired in the near future. Morgan Stanley, accompanied by JP Morgan, Kotak Mahindra and Bank of America Merrill Lynch, was also the lead banker at the Embassy Office Parks REIT issue.

The REIT portfolio involves grade A offices spaces spread over eight IT parks in towns, including the Mumbai Metropolitan Region (MMR), Pune, Hyderabad, Bengaluru and Chennai, out of the overall commercial development of K Raheja Corp.

“Both the companies have begun to work with the regulator on the process of filing papers for the proposed listing. The size of the portfolio has been finalized, with the evaluation anticipated to be finalized in the coming weeks,” said one of the individuals mentioned above.

Blackstone Group, in 2017, purchased a 15% stake in the select portfolio of K Raheja Corp’s commercial income-generating office spread over 20 million sq ft.

K Raheja Corp, India’s second-largest business park developer, is considered to be a prominent candidate in India to list its Real Estate Investment Trust (REIT). This undertaking was seen as a forerunner to the company’s strategy to list the commercial portfolio by means of an REIT. Under the brands Mindspace and Commerzone, the Mumbai-headquartered firm has created over 30 million sq ft of commercial space across western and southern areas of the nation.

The positive reaction to Embassy Office Parks REIT has given confidence to several real estate developers with a portfolio of revenue-producing commercial assets to pursue this path to monetise their holdings. REIT is an investment trust owning, managing and operating income-generating property assets. It enables individual investors to invest in this platform and receive income in the form of rental return and asset value appreciation of the estate.

Globally, since its creation over 50 years, REITs have become an increasingly prevalent vehicle for owning real estate. After its advent to the US market in 1960, the REIT system has found itself in more than 35 countries including UK, Singapore, Australia, Germany, Canada and Finland.

Strong demand for offices, poor vacancies and increasing rents remain to maintain momentum in private equity operation. Blackstone-Embassy REIT’s achievement has also added momentum with important learning for institutional investors about portfolio development, management and returns into the commercial office investment space.

Recent information from Cushman & Wakefield showed that private equity companies have invested more than $4.2 billion in India’s real estate industry, up 10% from a year ago. Office space stayed a strong investment target among all segments, garnering Rs 6,280 crore from institutional investors, comprising a 54.1% share of complete investment in the first quarter of 2019. Investments in the first quarter of 2019 were nearly 37% higher than in the same span last year.