Bengaluru: Embassy Group, which is in the process of buying a promoters’ stake in Indiabulls Real Estate Ltd (IBREL), plans to sell the office assets of IBREL to Embassy’s real estate investment trust, hire a new CEO for the Mumbai-based company and expand its portfolio by acquiring more projects, two people familiar with the plans said.
Bengaluru-based Embassy, backed by Blackstone Group LP, will buy around 39% stake of Indiabulls Group chairman Sameer Gehlaut and family for ₹2,700 crore at an equity valuation of ₹7,000 crore.
Once the acquisition is completed, IBREL will become an Embassy Group company, and will be run as a separate firm for now. It could be tentatively named Embassy Realty Ltd, the people cited above said on the condition of anonymity.
The transaction, which will see Indiabulls exit the real estate business to focus solely on financial services, also catapults Embassy Group from being largely a Bengaluru-based developer to becoming a pan-India developer with access to projects both in Mumbai Metropolitan Region (MMR) and Delhi-National Capital Region (NCR).
“After buying the first tranche of shares, Embassy will buy the second tranche by July-end after which it would make a mandatory open offer. Around 50% of the deal will be funded by Embassy and the remaining will be raised via debt. At a later stage, some of its projects will be injected into the new company and the office projects of Indiabulls will be sold to the REIT, bringing in cash for the Embassy-owned IBREL," said the first of the two people cited above.
Blackstone will join in as a shareholder in the new entity.
“The new company, run by Embassy, will also leverage the platform, along with Blackstone, to acquire real estate assets or projects from other developers, and will look at growing the portfolio. The aim would be to make it cash-rich and grow the company," said the second person.
Embassy Office Parks, which saw Embassy and Blackstone joining hands, is India’s first REIT, housing 33 million sq. ft of office and hospitality assets. The REIT issue was launched in March and raised ₹4,750 crore.
Property advisory JLL India has projected that commercial real estate market is likely to provide 294 million sq. ft of space that can be listed under REITs, valued at $35 billion from the existing office stock.
“The Embassy-Indiabulls transaction is a strategic one which will give Embassy more access to fund-raising opportunities because IBREL is a listed entity. The growth potential is big and because Embassy is known for its expansion and growth strategy, the shareholders of the company will also benefit. It also has a huge advantage of being backed by top institutional investors, so the company will be growth-oriented and that would see Embassy making inroads in other property markets, which not many developers are looking at today," said Shobhit Agarwal, managing director and chief executive at ANAROCK Capital.