Mumbai: Shares of Embassy Office Parks REIT closed at ₹314.10 apiece on the BSE, up 4.7% from its issue price of ₹300. India's first real estate investment trust (REIT) was listed at ₹312. The 18-20 March Embassy REIT IPO was subscribed 2.58 times.
"Encouraging response and good listing of Embassy REIT opens doors for many real estate companies with substantially large portfolio of rent-yielding properties," said Gaurav Dua, head (research) at brokerage Sharekhan.
"We expect (a) slew of REIT IPOs to hit the market in the coming months. Ability to raise resources through monetization of rent-yielding properties at relatively attractive cost is a re-rating trigger for not only the REIT-issuing real estate companies but also boosts investor sentiment towards entire sector."
The Embassy Office Parks REIT IPO, backed by global private equity firm Blackstone Group LP and Bengaluru-based developer Embassy Property Developments Pvt Ltd, aimed to raise ₹4,750 crore by issuing shares in a price band of ₹299-300.
The proceeds from the Embassy Office Parks REIT IPO will be used for servicing debt and acquisition of Embassy One assets. Post utilization of the IPO proceeds, total debt is expected to be less than 15% of market value, said HDFC Securities in a note on 16 March.
"For a first-of-its-kind product, a 5% premium on listing day is quite good. As things settle and investors begin to understand the product a little more, we're confident that there will be an upswing," said Arjun Lall, partner at Cyril Amarchand Mangaldas, the law firm that was involved in the structuring of the REIT.
"The Embassy REIT is also paving way for how investors view real estate assets. In the next two years, we are expecting atleast 5-6 more REIT offerings," Lall added.
Embassy Office Parks' portfolio comprises seven office parks and four prime city-centre office buildings, totaling 32.7 million sq.ft as of 31 December 2018, with strategic amenities, including two completed and two under-construction hotels totalling 1,096 keys, food courts, employee transportation and childcare facilities. Embassy has invested in high-quality assets in Bengaluru, Pune, Mumbai and Noida.
“While its portfolio is highly stabilized at 95% committed occupancy, it is well positioned to achieve further organic growth through a combination of contractual rent escalations, re-leasing at market rents, lease-up of vacant space and new construction to accommodate tenant expansion," said HDFC Securities in the 16 March note.
REITs are companies that own or finance income-producing real estate in a range of property sectors. Modelled like mutual funds, REITs provide all investors the chance to own real estate, present the opportunity to access dividend based income and total returns, and help communities grow, thrive and revitalize.
The stockholders of a REIT earn a share of the income produced through real estate investment without actually having to go out and buy, manage or finance property.
Jayshree P. Upadhyaya contributed to this story.