New Delhi: Indiabulls Real Estate Ltd, India’s fourth largest listed real estate developer, plans to price the shares of its real estate investment trust in the range of 0.75 Singapore dollar (around Rs23) each, said a person familiar with the matter.
The price benchmark has already been set after billionaire L.N. Mittal, chief executive officer of the world’s largest steel company, ArcelorMittal Co. NV, picked up a minority equity stake in the proposed real estate investment trust for US$75 million (Rs310.5 crore), or about Singapore $103 million (Rs314.25 crore).
Routing the investments through family-controlled and Mauritius-based, Wellmark Investments Ltd, Mittal has valued shares in the proposed investment trust at S$0.75 each, giving him 4% of the trust, said this person, who did not want to be named because he isn’t allowed to speak with the media before the trust is listed. The prospectus of the share offer details Mittal as an investor.
Issue plans: ArcelorMittal’s L.N. Mittal.( Madhu Kapparath / Mint)
Real estate investment trusts or Reits, such as the proposed Indiabulls one, use money from investors to purchase and manage property. Their shares (or common units as they are called) are traded on major exchanges. Much of the income from the properties owned by Reits is shared among its investors.
The company also hopes to raise US$25 million from another investor at a similar valuation, said the person.
Indiabulls plans to sell about 262 million shares in the proposed investment trust, Indiabulls Properties Investment Trust. At present, two firms, Indiabulls Real Estate Ltd and Farallon Capital, own 40% and 47% stake, respectively, in the trust.
Shareholders will dilute 15% stake in the investment trust to raise $300 million, which includes the private placement and the public offering, the person said. “We are diluting 10% stake in the trust through the public offering and 5% to investors who are picking up stake in the trust.”
This is the second time the Mittal-controlled investment company is picking up a stake in a venture of Indiabulls Real Estate. In February, it picked up 14.1% in Sophia Power Co. Ltd, an unlisted subsidiary of Indiabulls Real Estate, for Rs592.50 crore.
The asset portfolio of the proposed trust would include two office properties housing information technology firms in India. Both are located in Mumbai with a built-up area of nearly 3 million sq. ft of office space. The yield forecast, as per the document submitted with the Singapore market regulatory authority, is 5.1% for the year 2009 and 9.8% in 2010. The calculation is based on the assumed offering price of S$1 per common unit.