Indian real estate has been a no-go area for investors since, well, the inception of the nation.
I recall an early conversation with a portfolio manager from LaSalle Investment Management on the sidelines of a conference in the convention center here in Wan Chai. Since Chinese real estate is such hot property, would LaSalle, one of the world's largest institutional property fund managers, dabble in Asia's other 1 billion-population nation?
He laughed, shook his head, and rolled his eyes. Buying just one building was way too much work. Ownership had usually been subdivided and subdivided again among family members through various generations of inheritance. Corralling them to make a collective decision was a lifetime's work. Building a portfolio would be impossible.
Now, the work has been done for you. India's property market is increasingly institutionalized, and now it's available to retail investors, too.
The world's largest private-equity investor, the Blackstone Group (BX) , has paired with Indian developer the Embassy Group to list India's first real-estate investment trust. It's been a long time coming, amid many a false start, but the very first I-REIT has finally arrived.
This offers regular punters an easy way into Indian office space, with a hotel kicker. The listing doesn't yet have a U.S. counterpart, but is worth watching since I'm sure Blackstone has that in its plans.
Embassy Office Parks REIT BO:EMBA rose 3.7% on debut at the start of the week, and is ending it up 9.3% in late Friday trade as I write. Not a skyrocket ascent, certainly, but the offering is off the ground, and the performance suggests it has been properly priced.
Overseas investors were piling into Indian shares in February and March. And it has been overseas institutions, as well as wealthy individual Indian investors, who have been the backbone of support for this new REIT.
It is far from assured it will be a success. The Embassy Office Parks REIT has taken five years to make it to market. Previous attempts to list Infrastructure Investment Trusts in India began with great fanfare, then performed terribly.
Indian investors are also treading gingerly as the world's largest democracy prepares for nationwide elections. That is a chaotic and laborious process, as you'd expect in a country that still requires most paperwork to be filed long-form.
If you think the U.S. election cycle is long, consider that the ballot process alone in India takes more than a month. More than 900 million possible voters will participate in a seven-stage system.
Voting in India starts on April 11 and runs until May 19. Results are expected May 23 - and expect them then to be contested!
The Embassy Office Parks REIT counts Google (GOOGL) and JP Morgan (JPM) among its tenants. Its portfolio consists of seven office parks and four office buildings, in Bangalore, Mumbai, Noida and Pune.
That composes a total holding of 32.7 million square feet of high-grade office space. It also has two completed hotels, with another two under construction, three under the Hilton (HLT) brand and one a Four Seasons.
The listing gives Embassy Office Parks REIT a market value of US$3.7 billion. The offering was oversubscribed by 2.57 times, US$687 million in shares priced at 300 rupees, with a hefty share going to cornerstone investors and institutions.
Blackstone is the biggest of big hitters in Indian real estate these days, with three other joint ventures besides its deal with the Embassy Group. That gives it a portfolio of 78 million square feet.
Other international property power brokers such as Brookfield (BAM) is also building substantial portfolios, the Canadian real-estate asset manager now owning 24 million square feet of Indian office space.
Institutional investors such as the Dutch pension fund APG, the investment authorities of Abu Dhabi and Qatar, and the Canada Pension Plan Investment Board, have all formed platforms with developers to build portfolios in India, investing US$275 million on up.
So Indian stock brokers and money managers are watching to see if this REIT continues to trade successfully. If it does not, India's REIT experiment may stall yet again, stunting the growth of the nascent institutional real estate market.
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