Blackstone-Backed India REIT Wins Over Investors
Blackstone Group LP-backed Embassy Office Parks REIT has risen 21% since its listing.
(Bloomberg) -- India’s first ever real estate investment trust has outperformed peers since its debut in late March, helped by a low interest rate environment that’s forcing investors to look elsewhere for yield.
Blackstone Group LP-backed Embassy Office Parks REIT has risen 21% since its listing, beating indexes that track REITs in Singapore and Japan.
“This kind of return isn’t usual from a REIT,” said K V S Manian, president for corporate, institutional and investment banking at Kotak Mahindra Bank Ltd. “A large part has to do with the benign interest rate environment in India now.”
Interest rates in India are on a downward trajectory after the central bank cut borrowing costs three times since January. Economists say further easing is expected. REITs offer a fixed return from a pool of rent-yielding assets, along with the prospect of capital appreciation.
Embassy operates around 33 million square feet of office space and has marquee tenants including Microsoft Corp. and Rolls-Royce Holdings Plc. The REIT should see compound annual growth in rental income of around 16% through 2023, analysts at Kotak Securities Ltd. wrote in a report last month.
Rental income will receive a boost from re-pricing of old contracts at higher amounts and a better mix of occupants as leases are renewed, the report said.
Embassy’s securities were rated outperform by Credit Suisse Group AG earlier this month, bringing buy recommendations on the REIT to six, versus one hold and zero sells.
--With assistance from Baiju Kalesh and Anto Antony.
To contact the reporter on this story: Dhwani Pandya in Mumbai at dpandya11@bloomberg.net
To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, ;Serene Cheong at scheong20@bloomberg.net, Peter Vercoe
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