Embassy Office Parks REIT shares dropped over 1.7 per cent in early trade on Tuesday morning after around 77.1 million shares or 8.1 per cent equity changed hands in a big block deal, according to Bloomberg. However, buyers and sellers are not known yet.
On Monday, CNBC-TV18 reported Blackstone is slated to sell 77 million units of Embassy REIT worth Rs 2,650 crore. The offer price of the block deal stands at Rs 345 per unit.
The transaction was said to be worth around $325 million or Rs 2,660 crore as the floor price was fixed at Rs 345 per unit, a discount of 1.66 per cent to Monday’s closing price of Rs 350.82.
At 11.21 am, the stock was trading 0.83 per cent lower at Rs 348.50 over its last day’s closing price of Rs 351.40 apiece. The stock has fallen around 7 per cent in the last six months while it has gained about 6 per cent last year.
It was also reported that Abu Dhabi’s sovereign wealth fund, one of the world’s largest, is likely to pick up at least half of the stake that Blackstone would sell.
Embassy Office Parks, India’s first REIT to list in 2019, owns and operates more than 42 million square feet portfolio of office parks and office buildings in cities such as Bengaluru and Mumbai. It is the largest office REIT in Asia by area.
The block trade will be Blackstone’s third stake sale in Embassy, following two such sales in 2020 and 2021, where the private equity group has sold shares worth more than $500 million collectively.
Blackstone has invested more than $11 billion in Indian companies and assets over the years, but has been trimming its interests over time in Indian REITs.
Earlier this year, it sold its entire stake in India’s Mindspace Business Parks REIT for $235 million.
What is a REIT?
REITs, or Real Estate Investment Trusts, are special companies set up to own and manage real estate assets. REITs do not invest in just one property. Think of REITS like a mutual fund. A REIT invests in a portfolio of properties across sectors.
Typically, these assets are properties on lease that are designed to earn a rental income. There could be sector-specific REITs and they can even be defined by the type of ownership. Some REITs actually own the assets that they manage and operate. Others finance these real estate assets.
In most cases, once a REIT is set up, it is listed on stock exchanges just like any other company. Individual investors can now buy units of REITs just like they would buy individual stocks or shares from an exchange. Rental income generated by the portfolio properties is distributed to the investors as dividend income, making REITs a stable, income-generating option to invest in.
Global REITs may work for adding diversification to your portfolio, but they don’t really substitute physical real estate assets.