Pi­ra­mal Cap­i­tal plans third-party REIT plat­form

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Mad­hurima Nandy mad­hurima.n@htlive.com n

BENGALURU: Pi­ra­mal Cap­i­tal & Hous­ing Fi­nance plans to set up an ag­gre­gated plat­form com­pris­ing a port­fo­lio of rent-gen­er­at­ing, com­mer­cial of­fice prop­er­ties that could be listed through a real es­tate in­vest­ment trust (REIT).

The ra­tio­nale is that while there are a num­ber of goodqual­ity of­fice as­sets de­vel­oped by mid-sized devel­op­ers, not ev­ery­one has the crit­i­cal mass (in terms of port­fo­lio size) to do a REIT on their own.

“Pi­ra­mal will act as a spon­sor to the plat­form and earn a man­age­ment fee as a ser­vice provider,” said manag­ing di­rec­tor Khushru Jijina.

“As a third-party REIT, the valuation should be high. We will be ready to launch it next year. This adds to the bou­quet of ser­vices I of­fer and gives me a sig­nif­i­cant fee in­come.”

It’s early days, but Pi­ra­mal is targeting an enterprise valuation of ₹3,000 crore on listing, Jijina said.

Separately, Pi­ra­mal Cap­i­tal is also plan­ning to ag­gre­gate non-real es­tate, rent-gen­er­at­ing as­sets, across sec­tors such as road or lo­gis­tics, un­der a plat­form and may l i st it through an in­fra­struc­ture in­vest­ment trust (In­vIT).

REITs are listed en­ti­ties that pri­mar­ily in­vest in leased of­fice and re­tail as­sets, al­low­ing devel­op­ers to raise funds by sell­ing com­pleted build­ings to in­vestors.

Norms for both REITs and In­vITs were no­ti­fied in Septem­ber 2014.

Pi­ra­mal Cap­i­tal & Hous­ing Fi­nance has lent around ₹5,000 crore in con­struc­tion fi­nance to com­mer­cial of­fice projects and an­other ₹5,000 crore in lease rental dis­count­ing (LRD).

The LRD model of fi­nanc­ing is a longer-term fund­ing, where the project be­comes rent-gen­er­at­ing and devel­op­ers re­pay from those lease rentals.

As of March 2018, Pi­ra­mal had ₹48,000 crore of as­sets


un­der man­age­ment (AUM), of which ₹37,000 crore is in real es­tate and its rel­a­tively young hous­ing fi­nance busi­ness.

The re­main­ing ₹11,000 crore is from non-real es­tate busi­ness, in­clud­ing emerg­ing cor­po­rate lend­ing and lend­ing arm Cor­po­rate Fi­nance Group.

“An ag­gre­gated REIT plat­form makes sense be­cause there are devel­op­ers, who may not be able to do a REIT listing on their own, and it’ll be a good op­por­tu­nity for them to align it through Pi­ra­mal. If Pi­ra­mal buys some of th­ese as­sets, devel­op­ers could even sell off part of their port­fo­lio to get cash liq­uid­ity,” said Bi­jay Agar­wal, manag­ing di­rec­tor, Salarpuria Sattva Group, a Bengaluru-based de­vel­oper that is build­ing sub­stan­tial of­fice space in Hy­der­abad.

It has also part­nered with global in­vestor Black­stone Group Lp for a cou­ple of its of­fice projects.

De­spite the over­all slow­down in real es­tate, the com­mer­cial of­fice sec­tor has fared sig­nif­i­cantly bet­ter.

Yet, Em­bassy Of­fice Parks, the first to reg­is­ter a REIT with the stock mar­ket reg­u­la­tor last year, has de­layed its ap­pli­ca­tion for a listing to Au­gust.

Shashank Jain, part­ner, trans­ac­tion ser­vices, PwC In­dia, said while the plan is worth eval­u­at­ing, there would be chal­lenges.

“For a REIT, es­pe­cially an ag­gre­gated one, the qual­ity of as­sets would be key along with the size of the port­fo­lio and the ten­ant pro­file,” Jain said.

“While we haven’t seen a REIT listing yet in In­dia, there are plenty of mid-mar­ket of­fice as­sets but ag­gre­ga­tion will take its time.”

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