Raheja Real Estate Investment Trust listing expected next month; over Rs 3,000 cr likely to be raised

According to a July 6 report by property consultant firm Anarock, at 14% return on investment (ROI), India REITs outperformed BSE Realty Index. (Representative image)

K Raheja Corp, which owns marquee commercial real estate like Mindspace, The Square, Commerzone, and Inorbit mall is planning to raise Rs 3,000-4,000 crore through REIT (Real Estate Investment Trust) with a listing expected as early as next month, sources with knowledge of the development said.

The realtor has been working on a REIT for the last couple of years and is expected to file the offer document with the Securities and Exchange Board of India (Sebi) by the end of this week, sources told FE. Called the Mindspace REIT, the portfolio will have 29.5 million sq ft of commercial space spread across Mumbai, Pune, Hyderabad, Chennai and Delhi NCR.

Mindspace REIT will be the second publicly-traded REIT after Embassy and Blackstone raised over Rs 4,700 crore through an IPO in April 2019. A REIT enables owners of real estate to pool income generating assets together in a portfolio and allows investors to buy ownership in real estate assets in the form of equity. REITs have to pay out majority of their earnings as distributions to unit holders. The REIT leases space and collects rents on the properties, then distributes that income as dividends to shareholders. The Embassy REIT is said to be Asia’s largest in terms of portfolio size of 33 million sq ft spread across seven business parks and four city-centric buildings in Mumbai, Bengaluru, Pune and Noida.

Of the 29.5 million sq ft of commercial assets that will be part of the Mindspace REIT portfolio, 23 million sq ft are completed and rent yielding, the area that is under construction is 2.8 million sq ft and future development area will be to the tune of 3.6 million sq ft, according to an investor presentation seen by FE. The office assets to be put under REIT boast of marquee tenants like Facebook, Verizon, Capgemini, UBS, Barclays, Amazon, Schlumberger, Qualcomm, among others. An e-mail sent to the company seeking confirmation remained unanswered till press time.

According to a July 6 report by property consultant firm Anarock, at 14% return on investment (ROI), India REITs outperformed BSE Realty Index. Embassy Office Parks REITs, which is the only publicly-traded REIT in India as of June 2020, had market capitalisation of around $3.45 billion, which is 17% of the listed real estate stocks’ market capitalisation in India.

Shobhit Agarwal, MD & CEO of Anarock Capital said that India’s maiden REIT has paved the way for many others to follow suit. “We are witnessing consolidation of portfolios and good quality office assets are exchanging hands. Several developers and owners of commercial office real estate are in various stages of preparing for the listing,” he said in a note. Currently, the top seven cities of India have close to 550 million sq ft of Grade A office supply, of which 310-320 million sq ft is REIT-able, according to Anarock.

In India, regulations require REITs to pay out 90% of distributable cash flows and must have at least 80% of their assets as completed and income-generating. REITs are typically listed on stock exchanges through an initial public offering (IPO) and once listed, they serve as permanent capital vehicles to raise debt and equity in the capital markets to acquire new assets to grow. In India, currently only commercial assets are allowed to be put under REIT, while residential assets have been kept out of the purview of REITs for now by Sebi. REITs are expected to provide regular, growing cash yield with steady capital appreciation through increasing property valuation.