Embassy REIT to offer 9-9.25% for three-year money

MUMBAI: Realty investment trust Embassy Office Parks that has announced its decision to go public is planning to raise up to Rs 4,000 crore by selling bonds after its planned initial public offer.

The Blackstone backed-real Embassy Office Parks plans to buy more office space hoping to cash in on hopes of economic growth accelerating after the general elections in May.

JP Morgan and Kotak Mahindra Bank are helping the issuer raise the three-year money, two people familiar with the matter told ET. The bond sale could also be striped into one or two tranches. The first tranche could of Rs 2,300 crore, the sources said.

“We have executed a non-binding term sheet to borrow up to Rs 4,000 crores. The rate is 9 – 9.25% and it is a 3- year maturity bond,” the spokesperson for Embassy Office Parks told ET.

JP Morgan and Kotak Mahindra Bank had not responded to queries till press time.

Dealers said, the interest range for the issue could also widen to 9.50-9.75% as the final pricing is yet to be fixed.

Earlier on March 12, ET reported that Embassy Group would launch India’s first real estate investment trust (REIT) next week to raise about Rs 4,750 crore. The initial public offering will open for subscription on Monday.

The Embassy Office Parks REIT, a joint venture between the Bengaluru-based property developer and private equity firm Blackstone, holds 33 million square feet of commercial office comprising seven business parks and four city centric buildings spread across Mumbai, Bengaluru, Pune and Noida.

REIT is an investment tool that owns and operates rent-yielding real estate assets. It permits individual investors to make investment in real estate without owning it and earn an income.

Currently, the minimum investment in a REIT is Rs 2 lakh per investor. Once it is listed, trading will be for a minimum lot of Rs 1 lakh. Income earned by REIT could be through rentals or capital gains or both.

It gets distributed to unit holders. SEBI rules state that REITs shall distribute not less than 90 per cent of the net distributable cash flows to its investors at least on a half yearly basis.

According to industry estimates, the rental yield from a commercial property is in the range of 7-9 per cent, while capital appreciation can be expected to be between 4-7 per cent over the long term.

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