RMZ in talks with bankers for $300 million REIT offering
Mumbai: Real estate developer RMZ Corp. has started the process of selecting investment banks to manage its initial public offering (IPO) for its proposed real estate investment trust (REIT) which could see the developer raise more than Rs2,000 crore, three people aware of the development said.
REITs are entities that primarily invest in leased office and retail assets, allowing developers to raise funds by selling completed, rent-yielding buildings to investors.
The developer had invited investment banks to pitch for the mandate to manage the offering, they said, requesting anonymity.
“They (RMZ Corp.) have started the process to appoint banks for their REIT. The company met at least 8-9 investment banks last week for pitches, which included a mix of domestic and foreign banks. These were held between Monday and Wednesday last week,” one of the three people cited above said.
RMZ Corp. is expected to hold at least a couple more rounds of discussions before finalizing the bankers for the offering, he added.
The proposed REIT could see RMZ raise at least $300 million, said a second person cited above.
However, he added that discussions are at an early stage and the company may raise as much as $500 million (over Rs3,000 crore).
RMZ is looking to sell a stake in around 20 million sq. ft of commercial rental property that it owns, through the proposed REIT offering, he added.
Raj Menda, co-founder and corporate chairman at RMZ Corp., confirmed the development.
“Yes, only bankers presented. Board to decide further,” he said.
The Bengaluru-based developer is backed by sovereign wealth fund Qatar Investment Authority, which invested around $300 million in RMZ in 2013.
RMZ is the second real estate firm to start preparing for a REIT offering.
Global private equity firm Blackstone Group Lp-backed, Bengaluru-based Embassy Property Developments Pvt. Ltd in October filed an application for a REIT with Securities and Exchange board of India, or Sebi. Embassy Property has hired US investment bank Morgan Stanley to manage the REIT offering.
In September, Mint reported that RMZ is planning to completely move out from the residential business and will focus on expanding its commercial portfolio across major cities in the country.
“We had launched a few residential projects a few years back. From a strategy standpoint, residential business is going to be on the backburner. We are not going to take up any fresh projects. It is only going to be commercial real estate going ahead,” Thirumal Govindraj, managing director (management), RMZ Corp., said in an the interview.
The developer is looking to acquire office assets, Mint reported.
In 2016, RMZ signed a Rs2,350-crore deal to buy Essar Group’s Equinox Business Park, in Mumbai’s financial hub Bandra-Kurla Complex (BKC).
In 2015, it has acquired an 800,000 sq. ft of IT Park space in Gurgaon from property firm BPTP Ltd.
According to a 1 March note by real estate consulting firm JLL India, the REIT potential in India is huge, with around 229 million sq. ft of office space currently being REIT-compliant.
“Even if 50% of this space is listed in the next few years, we are looking at a total REIT listing worth $18.5 billion. Moreover, India’s stock of Grade A commercial assets is increasing, with REITs acting as a sure-fire growth catalyst,” the note said.