Mindspace Business Parks REIT IPO: Here’s All You Need To Know
A commercial office space is seen through the windscreen of a taxi. Photographer: Dhiraj Singh/Bloomberg

Mindspace Business Parks REIT IPO: Here’s All You Need To Know

Mindspace Business Parks Real Estate Investment Trust will launch it three-day initial public offering on July 27 to raise up to Rs 4,500 crore as it looks to pare debt and monetise its assets.

The IPO is backed by Blackstone Group and the property developer K Raheja Corp., and is the second such in India after Embassy Office Parks came out with its offering in April last year, when it raised nearly Rs 4,750 crore. REITs are mutual fund-liked listed instruments that pool in income-generating assets and allow investors to take exposure in real estate without physically owning it.

The trustees are looking to sell around 16.36 crore units at Rs 274-275 apiece, according to its red-herring prospectus. Out of this, 4.09 crore units—worth nearly Rs 1,125 crore—would be allocated to strategic investors.

Anchor investors have already been allotted units worth Rs 1,519 crore ahead of the offering, Mindspace said in a statement.

The promoters seek to dilute their stake in the REIT from 85% at present to 65%. The REIT’s existing unit holders are expected to offload stake worth Rs 3,500 crore and fresh units worth Rs 1,000 crore would be issued, according to the offer document filed by K Raheja Corp. to the market regulator.

The minimum lot size is 200 units. Given the price band, it entails a minimum investment of Rs 54,800.

Mindspace REIT Structure

  • Sponsors: Anbee Constructions LLP and Cape Trading LLP, which are part of K Raheja Corp.
  • Blackstone owns around 15 percent in various special purpose vehicles that are part of the Mindspace REIT.
  • K Raheja Corp. Investment Managers LLP has been appointed as manager to Mindspace REIT and Axis Trustee Services is its trustee.
Mindspace Business Parks REIT IPO: Here’s All You Need To Know

REIT Portfolio

Mindspace REIT has five integrated business parks and five independent offices. Its tenants include Accenture Inc., Qualcomm Inc., BA Continuum, JP Morgan, Amazon Inc., Schlumberger Ltd., UBS Group AG, Capgemini SE, Facebook Inc., Barclays Plc. and BNY Mellon Corp. As on March 31, 84.9 percent of its gross contracted revenue is derived from multinational companies. Nearly 40% of its revenue is from Fortune 500 companies.

The market value of the REIT’s portfolio as of March 31, including its facility management division, is Rs 23,675.1 crore, according to its valuer. The portfolio is spread across Chennai, Hyderabad, Mumbai and Pune.

Between April 1, 2017, and March 31, 2020, the REIT leased 7.6 million sqft of office space and achieved average re-leasing spreads of 28.9% on 3 million sqft of re-leased space. It also leased out 4.6 million sqft of new area to 60 tenants during this period.

It achieved a re-leasing spread of 23.1% for 1.1 million square feet area that was re-leased during the ongoing fiscal, according to its exchange filing.


Net operating income stood at Rs 1,225.7 crore for the year ended March 2020, and is projected to rise by 59% to Rs 1,951.4 crore in three years.

Revenue has grown at an annualised rate of 11.82% over the last three years, but borrowings have risen 21% to Rs 6,357 crore over the last two years. Dividend yield stands at 3.5% for FY20, which is projected to increase to 7.5% for FY21, according to BloombergQuint’s calculations

Peer Analysis

Embassy Office Parks REIT has relatively lesser return on equity compared with Mindspace Business Parks REIT. It, however, offered better dividend yield of 6.6% for FY20 compared with Mindspace REIT’s 3.5%, according to BloombergQuint’s calculations.

Covid-19 Impact And Risks

Mindspace REIT collected 99.4% of its gross contracted rentals for March and its properties weren’t fully occupied by tenants for April and May. Still, rental collections dipped only marginally.

Since April 1, the REIT, according to its red herring prospectus, has leased 0.7 million sqft of area—of which 40.5% was leased to existing tenants and the remainder to new tenants. That includes 42,567 sqft of office space at Commerzone Porur in Chennai, which is under construction.

The REIT has not availed any deferments or moratoriums on any of its financial commitments.

Risks To REIT

  • Effects of the Covid-19 pandemic on future operations and cash flows. It could impact compliance with covenants in credit facilities and other financing agreements.
  • Slowdown in demand for commercial space.
  • Work from home trend can lead to higher vacancy in key markets, affecting rental income in the near term.
  • Renegotiation of existing contracts at lower rates

Allocation To Anchor Investors

The REIT has finalised allocation of 5.52 crore units at Rs 275 apiece, aggregating to Rs 1,519 crore, it said in a filing on July 24. Mindspace Business Parks REIT has raised this amount from 54 anchor investors, including sovereign entities, insurance companies and mutual funds.

Key anchor investors in this allotment include Government of Singapore, Nomura, Fidelity Group. HDFC Standard Life Insurance Co. and SBI Life Insurance Co. were among the key domestic investors.

The REIT has already received commitment worth Rs 1,125 crore from institutional investors including GIC, Fidelity Group, Capital Group and Fullerton Group. With both strategic and anchor investments, the proposed REIT issue stands nearly 59% subscribed.

(Information was collated from red-herring prospectus, exchange filings and reports by Axis Capital, Angel Broking, JM Financial and Nirmal Bang)

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