REIT - Can this AIF change the discourse of MF in India?
The IPO of Embassy Office Parks REIT, the first ever in India being launched soon is building enough excitement. Will it live upto expectations or end up like many index funds is something which i wont dare to speculate today but let's consider some facts:
- This is a JV between Embassy and Blackstone with 33 mn sqft of office and hospitality assets comprising 7 business parks and 4 city-centric buildings spread across Mumbai, Bengaluru, Pune and Noida. 24 mn sq ft operational with 95% occupancy, yielding a rental income of over Rs 2,000 crore annually. Almost half the rent comes from Fortune 500 companies such as Microsoft, Google, Wells Fargo and JPMorgan
- Global funds like Capital group will invest Rs 872 cr (of 4750 cr target of which 75% will be allocated to institutional investors)
- According to a CBRE- CII report, a successful REIT listing would prompt other prominent asset holding companies such as Xander, Brookefield and Canada Pension Plan Investment Board to issue their own offerings, thereby widening the real estate investment scenario in the country
- Indicative yield might be 8-8.25% pre tax & fund management charges gross up. Embassy's reported profit for FY18 - 260 cr
Success (or otherwise) of this REIT could largely decide the future of alternate investment funds for retail (HNI) and institutional investors. Whilst it has the potential to take away most known risks involved in a RE investment in India, the upside on account of capital appreciation might be limited. #Randomusing