The Embassy group-backed by Blackstone firm launched the Real Estate Investment Trust [REIT] and also announced its decision to raise approximately Rs. 4,000 crore via selling bonds by opening the Initial Public Offer [IPO].
The Embassy group is planning to purchase more office spaces by cashing in the economy that is expected to grow fast after the general assembly elections are over in May.
According to the sources, both JP Morgan and Kotak Mahindra Bank are offering assistance to raise the three-year money. The sale of bonds is expected to be carried out either in solo or twin rounds. The first portion is expected to be of Rs. 2,300 crore.
The spokesperson of the Embassy group said that the company has executed a non-binding term sheet to borrow up to Rs 4,000 crores. The rate is fixed at 9 to 9.25% and the bond will get mature in 3 years.
However, the dealers informed that the interest range for the bonds can go upto 9.50-9.75% as the costing for the same is yet to be finalized.
Earlier this month, a media report was floated that the Embassy group is likely to launch India’s first real estate investment trust (REIT) around 15th March to raise approximately Rs. 4,750 crore.
The subscription for IPO [Initial Public Offer] will be opened on Monday.
The Embassy Office Parks REIT, is a joint venture between the Bengaluru-based real estate firm and Blackstone a private equity firm. The company holds 33 million sq.ft. area of commercial office that includes seven business parks and four city-centric establishments in Mumbai, Bengaluru, Pune and Noida.
A person or an individual can earn income from the real estate sector without even owning assets as the REIT is an investment tool that owns and functions rent-yielding real estate assets.
At present, a person can make a minimum investment of Rs. 2 lakh rupees in the Real Estate Investment Trust. After listing, the trading for minimum Rs.1lakh can be done. You can earn income by REIT via rentals or capital gains or by both.
The same will get distributed to the unitholders. According to the SEBI rules, REITs cannot distribute less than 90 percent of the net distributable cash flows to the investors for at least on a half yearly basis.
The industry estimates that the rental yield from a commercial property ranges between 7-9 percent, whereas the e capital appreciation is estimated to range between 4-7 percent in long term.