The Embassy Office Parks REIT IPO, sponsored by global non-public fairness company Blackstone Group and Bengaluru-primarily based developer Embassy Property Developments Pvt Ltd, was subscribed 2.57 times during its initial proportion sale between March 18 and 20. The IPO saw the REIT boost a complete of ₹4,750 crores (US$690 million).
This is India’s primary ever Real Estate Investment Trust (REIT) – a main milestone in the real property sector. It may also be Asia’s most abundant in phrases of office portfolio location, with seven workplace parks and four office buildings unfolding throughout Mumbai,
Bengaluru, Pune, and Noida, spanning 32.7 million square toes of leasable place.
Cyril Amarchand Mangaldas is the Indian prison counsel to Embassy REIT, the Manager, the Embassy Sponsor, and the Blackstone Sponsor. Clifford Chance (lead Partner Rahul Guptan) was the International legal recommend for Blackstone and Embassy Property Developments. Simpson Thacher & Bartlett is the International prison recommended for the Blackstone Sponsor. S&R Associates (lead Partner Sandip Bhagat) acted as home felony recommends for the Lead Managers, and Latham & Watkins had been the International recommendation. We communicated to Cyril Amarchand Mangaldas Partner Arjun Lall, the lead companion who oversaw the list of India’s first REIT, on the challenges.
REIT isn’t the same as other offerings and much more.
The offered file says that the first filing of Embassy REIT was in August 2017. Since this became the first REIT without precedents, how difficult did it evolve? The complete process has been challenging and interesting from the get-move. August 2017 was only the registration of the Embassy REIT because it was the first REIT in India. But work in this transaction began in 2013, even earlier than the REIT Regulations had been notified.
It turned into a collaborative technique driven by using the lead merchant bankers with the regulators and supported by sponsors and advisors like us, running to ensure that the regulatory framework for this product married the fine of worldwide practices with peculiarities related to the Indian actual estate zone.
While the REIT Regulations were notified in 2014, there were numerous conceptual troubles that the organization grappled with at the very beginning – from whether REIT units might be considered ‘securities’ for the SEBI framework to what instructions investors may want to spend money on REIT units.
Similarly, from a process and disclosure point of view, it took some time earlier than there was sufficient clarity on troubles along with the form and way of instruction and presentation of economic records and projections of the REIT; the manner and timing of acquisition of the asset portfolio; how REIT IPOs might be underwritten; whether REIT IPOs ought to consist of a suggestion on the market element, and so on.
Aside from the policies, there were different teething problems standard to any nascent regulatory surroundings that the working institution faced – the absence of a separate buying and selling platform for REITs on the inventory exchanges, necessities for listing and buying and selling approvals for REITs, in addition to procedural formalities related to the difficulty and allotment of devices. Resolution of these matters required the concerted efforts of several regulators and authorities departments other than SEBI and inventory exchanges, consisting of the RBI, the MCA, the PFRDA, the IRDAI, and so on.
Fortunately, each of the regulators and government departments has been receptive to the worries and troubles highlighted and labored collectively with SEBI and the relaxation of the operating group over the last few years towards the evolution of a comprehensive regulatory framework for the setting up and list of REITs.
We wouldn’t call them demanding situations per se. Still, there are intrinsic variations in putting in and listing a REIT vis-à-vis an imparting of equity stocks, which might require issuers and promoters to process the process in another way. For instance:
The promoter equivalents (sponsors below the REIT regime) must cede control of the portfolio belongings to the REIT and authority and manipulate the belongings vests with an unbiased REIT manager. While sponsors will keep devices within the REIT and experience rights as unitholders, all investment and control selections when it comes to the property will be undertaken with the aid of the REIT manager.
Given the ordinary protecting systems in the Indian real property region, which includes co-mingled property, multi-stage preserving plans, business preparations with landowners along with JDAs, JVs, and many others, a huge stage of notion method and restructuring of asset holdings can be required to ensure compliance with the REIT Regulations. In addition to the vast documentation involved (relying on how the transaction is structured), control time can also be diverted towards negotiations and discussions with various stakeholders in the assets to ensure their buy-in.