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Published on: July 27, 2020, 12:07 a.m.
A right option
  • Mindspace Business Parks is one of the largest owners of A Grade office space in the country

By Arbind Gupta. Assistant Editor, Business India

After Embassy Office Parks REIT’s IPO in March 2019, Mindspace Business Parks REIT offering is now the country’s second one, which is opening for subscription on 27 July and closing on 29 July, with the price band fixed at Rs274-275 per share. Jointly backed by Mumbai-based realtor K Raheja Corp and private equity major Blackstone group, the REIT IPO will have a fresh issue of units aggregating up to Rs1,000 crore and offer-for-sale of units of Rs3,500 crore. In total, the company is looking to raise up to Rs4,500 crore from this issue.

Mindspace Business Parks REIT IPO has already received commitment worth Rs1,125 crore from institutional investors including Singapore government’s sovereign fund GIC, affiliates of Fidelity group, Capital group and Fullerton group. With this, the proposed REIT IPO has already received response for 25 per cent of the issue size by strategic investors who will be allotted the units at R275 per unit.

Morgan Stanley India Company, Axis Capital, DSP Merrill Lynch, Citigroup Capital Markets India, JM Financial, Kotak Mahindra Capital Company, CLSA India, Nomura Financial Advisory and Securities India, UBS Securities India, HDFC Bank, Ambit Capital, IDFC Securities and ICICI Securities are book running lead managers to the issue.

Mindspace Business Parks is one of the largest owners of A Grade office space in the country with five integrated business parks and five independent offices. It boasts of a well-diversified portfolio of 172 tenants where no single tenant contributed more than 7.7 per cent to its gross contracted rental value. Furthermore, over 84 per cent of its gross contracted rentals are derived from leading multinational corporations and around 39 per cent from Fortune 500 companies. Its tenant base comprises a mix of multinational and Indian corporates, including affiliates of Accenture, Qualcomm, BA Continuum, JP Morgan, Amazon, Schlumberger, UBS, Capgemini,
Facebook, Barclays and BNY Mellon.

The portfolio comprising over 23 million sq ft of completed area, has 92 per cent of committed occupancy. Importantly, the projects are located across four key cities, Mumbai, Hyderabad, Pune and Chennai, which together account for over 56 per cent of the total Grade A net office absorption in top six Indian cities. As on 31 March, 2020, 32 buildings in its portfolio and 16.2 million sq ft of leasable area were LEED/IGBC Gold/Platinum certified/pre-certified.

Led by Vinod Rohira its CEO, the entity has pulled off an impressive performance. Between April 2017 and March, 2020, the company has leased 7.6 million sq ft of office space. It has achieved average re-leasing spreads of 28.9 per cent on 3 million sq ft of re-leased space and leased 4.6 million sq ft of new space to 60 tenants. The entity reported a 21 per cent jump in revenues at Rs2,026 crore in FY20 over FY19, even as the profit for the year ended March 31, 2020 was flat at Rs514 crore. As on 31 March, 2020 the total market value of its portfolio was over Rs23,000crore.

“REITs are an attractive investment offering, especially in the current environment when interest rates are benign. Apart from capital growth, the returns from REITs include dividend returns which are currently over 7 per cent. Overall, REITs promise to offer healthy returns over a 3-5-year period. Investors have had a positive experience from India’s first REIT in the last year,” says Arvind Nandan, managing director, research & consulting of international property consultant Savills India.

Savills India in its recent report has said that India’s sole REIT launched in early 2019, has outperformed the market, not merely in normal circumstances but even during the ongoing pandemic. It has also pointed out that REITs are relatively secure as 80 per cent of the underlying assets in REITs are required to be operational and income-generating. Moreover, the diminishing returns in other investment avenues such as PPFs, FDs, RDs and government bonds when compared to the superior pre-tax yields of REITs, makes it a lucrative option.

Whilst REITs have existed globally since past 60 years and are a $2 trillion asset class currently, India saw its first REIT in March 2019 when Embassy Office Parks REIT (for around 33 million sq ft) got listed on the stock exchanges and paved way for retail investors to participate in the commercial real estate sector.

REITs enable investors with returns through stable rent-yielding cash flows (with 90 per cent of the earnings distributed to unit-holders) and capital appreciation.

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