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Blackstone plans 7 per cent yield for India's first REIT IPO

[MUMBAI] Blackstone Group LP and its Indian partner set a tentative yield for their initial public offering of the country's first real estate investment trust, which could raise about 52.5 billion rupees (S$982 million), people with knowledge of the matter said.

Blackstone and Embassy Group plan to approach investors with an annual yield of around 6.5 per cent to 7 per cent, according to the people, who asked not to be identified because the information is private. They are considering marketing the deal with a total return of about 14 per cent to 16 per cent, which takes into account factors like asset value appreciation and rental increases in addition to yield, the people said.

The firms plan to file a preliminary prospectus with the Indian capital markets regulator this week for the REIT, which will hold more than 300 billion rupees of assets, the people said. Its portfolio will include about 33 million square feet of real estate, including 24 million square feet of completed projects, according to the people.

Blackstone is pursuing India's first REIT as the South Asian country's cash-starved property firms continue to recover from sweeping policy changes and struggle to access liquidity. The REIT listing would also be an important test after much-hyped infrastructure trusts failed to gain traction in India.

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The listing will include properties from the Embassy joint venture as well as from Blackstone's own portfolio, the people said. In 2012, Blackstone and its Indian partner created joint venture Embassy Office Parks, which includes properties that count Microsoft Corp. and Rolls-Royce Holdings Plc as tenants.

Blackstone's REIT, which will initially target about 52.5 billion rupees, will include a so-called greenshoe option to boost the size of the offering by about 25 per cent depending on demand, according to the people. Details of the offering are still being discussed, and the proposed terms could change, the people said.

The Economic Times reported the planned yield earlier Monday, citing unidentified people. Representatives for Blackstone and Embassy declined to comment.

Bank of America Corp, JPMorgan Chase & Co, Kotak Mahindra Bank Ltd and Morgan Stanley are leading the offering, the people said. Axis Bank Ltd., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc, IIFL Holdings Ltd., JM Financial Ltd. and Nomura Holdings Inc. are also working on the deal, according to the people.

Blackstone's real-estate unit, the largest owner of office space in India, has spent US$5.3 billion on about 30 investments in the country, the people said. About US$3.9 billion was invested in commercial property, with the remainder going into retail and residential projects, the people said.