Blackstone, RMZ may roll out REITs first

Blackstone, the US private equity (PE) giant, and Bengaluru-based RMZ Corp, a developer-investor, could be the first ones to hit the market to list their real estate investment trust (REIT), after the finance minister cleared the final roadblock on dividend distribution tax in such bodies.

“Blackstone already has the structure shelved plans earlier due to tax structures. Now, it can hit the market faster than others,” said an executive who is aware of their plans.
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Blackstone and its joint venture partner, Embassy, had considered floating a $2-billion REIT but did not go ahead due to issues with the regulations.

In the Union Budget, the finance minister had said the distribution made out of income of a Special Purpose Vehicle to REITs and infrastructure investment trusts (InvITs) did not attract dividend distribution tax (DDT). REITs are similar to mutual funds, and can be listed and traded on stock exchanges. These have to distribute a majority of their income as dividend.

Blackstone was to look at an Initial Pubhlic Offer of equity on its investments or sell out to other investors eventually, if REITs did not happen, said the executive quoted earlier.

“As a matter of policy, Blackstone does not comment on media speculation,” its communications agency said in an e-mailed response.

Blackstone has been investing in office assets in India since 2008 and has 30 million sq ft across 16 office parks, making it the largest operator of these in the country.  Globally, it is the largest real estate PE entity, with $94 billion of assets under management. It also manages the biggest publicly traded REITs.

RMZ, one of the biggest owners of office assets and backed by Qatar Investment Authority, is looking to list in 2017 or beyond, said its executive chairman, Raj Menda.  “Currently, we are in the acquisition mode,” he said.

RMZ owns 13 million sq ft office space in the country and the company wants to take this to 20 mn sq ft by 2017 and 80 mn by 2021. In the first phase up to 2017, it will develop and acquire properties and after that, offload a stake in the holding company, Menda recently told this newspaper.

“DDT exemption for REITs is a welcome move and will help commercial assets to be amortised and create wealth for investors,” said Menda, also a member of the Asia Pacific Real Estate Association (Aprea).

DLF, the country’s largest listed developer, could hit the market with a REIT possible only in 2017-18, said a source, aware of the company’s plans. “Their first priority is to sell 40 per cent stake in the rental company, likely to happen towards the end of this year. Once it is done, they will look at a REIT, which should take six to nine months,” said an executive, who declined to be identified.

Even K Raheja Corp does not seem to be in a hurry to launch a REIT and list it. “We will study the regulations and listings thoroughly and then proceed,” said Sunil Hingorani, its director, finance.

Aprea has been lobbying for launch of REITs. It said the Budget promises to remove a huge barrier to the launching of a world class REIT marketplace on the subcontinent.

“REITs will also help unlock the balance sheets of asset-heavy developers and reduce reliance on debt by injecting liquidity into the sector,” said Peter Verwer, its chief executive.

According to realty consultancy JLL, 80-100 mn sq ft of office space in the country, worth at least Rs 100,000 crore, could qualify to be included under REITs. These assets could together generate rental of Rs 6,000 crore annually.

“If we assume that even 50 per cent of these get listed, we are looking at total REITs listing worth $18.5 billion,” said Anuj Puri, chairman of JLL India.


80-100 mn sq ft

of office space Reit-compliant assets

Rs 1,00,000 cr

Potential value of Reits

Rs 6,000 cr

Rental potential

$18.5 bn

Potential worth of Reit listing

Probable candidates

RMZ, Blackstone, K Raheja Corp, DLF

Source: JLL India

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