FIIs line up to invest in Embassy Office Parks REIT IPO, anchor book opens today

Mumbai: Foreign institutional investors (FIIs) as well as domestic ones, including Fidelity Investments and Kotak Life Insurance, have shown strong interest in investing in India’s first real estate investment trust (REIT) listing, said three people aware of the development. Embassy Office Parks REIT, backed by global private equity Blackstone Group LP and Bengaluru-based developer Embassy Property Developments Pvt. Ltd, plans to raise ₹4,750 crore from its 18-20 March initial public offering (IPO), the largest this year.

The REIT is selling its units for ₹299-300 apiece, which values it at ₹23,150 crore, or approximately $3.3 billion.

“There is a strong interest from foreign institutional investors (FIIs) as this is a mature product in the western markets and, hence, they understand it better. They have already received a large cheque from the Capital Group as part of a strategic investor allocation and now they have received interest from FIIs such as Fidelity, Schroders, and TT International to participate in their anchor book allocation, which opens on Friday,” said first of the three people mentioned above, requesting anonymity as he is not authorized to speak with the media.

The anchor book is that part of an IPO that bankers can allot to institutional investors on a discretionary basis. Anchor book subscriptions open a day before the launch of an IPO and are seen as a gauge of institutional investor interest.

The anchor book, which opens on Friday, 15 March will see the REIT sell units worth around ₹1,750 crore.

Ahead of the IPO, which opens on Monday, the REIT allocated units worth ₹876 crore to global investor Capital Group’s funds, including New World Fund, SMALLCAP World Fund, and Global Small Capitalization Fund at ₹300 apiece, according to prospectus.

Kotak Life Insurance is expected to invest in the anchor book, though DII interest in the REIT offering is lukewarm, said the second person mentioned above on condition of anonymity.

“On the other hand, interest from high net-worth individuals and family offices has been strong, as a REIT product makes for an easier way to own exposure towards commercial real estate,” he said.

Fidelity, Schroders, and Embassy Office Parks REIT did not comment on the matter, while emails sent to TT International and Kotak Life did not elicit any response till the time of publishing this story.

Embassy REIT’s portfolio comprised about 33 million sq.ft of office space across seven office parks and four prime city-centre office buildings as of 31 December.

It includes strategic amenities, such as two completed and two under-construction hotels totalling 1,096 rooms, food courts, and employee transportation and childcare facilities. The REIT’s portfolio has an occupancy rate of 95% and more than 160 blue-chip tenants. Office properties that are part of the REIT offering include the Express Towers at Nariman Point in South Mumbai and First International Finance Centre in the Bandra Kurla Complex.

The Embassy IPO will be the largest public offering so far this year. So far, only one company, Chalet Hotels Ltd, has completed an IPO in 2019, raising ₹1,641 crore in January.

State-owned MSTC Ltd launched its ₹226 crore IPO on Wednesday. In 2018, 24 companies raised ₹30,959 crore through initial share sales, according to data from primary market tracker Prime Database.