Mindspace Business Parks REIT made a strong debut on bourses, listing at Rs 304 on BSE, a 10.55 percent premium over its issue price of Rs 275.

The Rs 4,500-crore REIT issue was opened on July 27 till July 29 and was subscribed 13 times. The issue received bids for 87,78,24,600 shares against the total issue size of 6,77,46,400 shares. The institutional investor's category witnessed a subscription of 10.61 times while that of non-institutional investors saw 15.77 times subscription.

The K Raheja Corp and Blackstone-backed Mindspace Business Parks REIT is the second in the country to list on exchanges after the Embassy Office Parks REIT that was listed in March 2019 following fundraising of Rs 4,750 crore via IPO.

A REIT is a listed product that allows investors to make liquid investments in real estate in a ticket size as low as Rs 50,000.

“Investors can earn a return of 11-12 percent. Of this, 7-8 percent accrues from rental yield, which is as stable as debt. Combining the stability of debt and upside of equity, REITs are a must have in any investor portfolio,” said Sharad Mittal, CEO at Motilal Oswal Real Estate Fund.

“The listing of the Mindspace REIT at around 11 percent premium shows that a balanced product like REIT is preferred by both institutional and retail investors. Despite the recent weakened sentiment around commercial real estate, a diversified portfolio of grade A assets with strong rental collections as demonstrated by the Mindspace REIT finds flavor with the retail investor. This listing will augur well for future investments in asset backed financial products and commercial real estate in India,” Mittal added.

Mindspace Business Parks REIT owns a quality office portfolio located in four key office markets of India- Mumbai, Hyderabad, Pune and Chennai. Its portfolio has a total leasable area of 29.5 msf and is owner of one of the largest Grade-A office portfolios in India.

“The promoters and company have a proven track record in real estate & retail space with listed companies like Chalet Hotels and Shoppers Stop. The REIT only has exposure to commercial office space, which is the least impacted segment in real estate due to COVID-19 outbreak. Resilience of the business model is reflected in healthy collections at 97.5% for the months of March, April & May which provides comfort,” Yash Gupta, Equity Research Associate, Angel Broking Ltd said.

Mindspace Business Parks REIT portfolio assets are diversified across 172 tenants with no single tenant contributing more than 7.7 percent of the Gross Contracted Rentals. As on March 31, 2020, approximately 84.9 percent of the Gross Contracted Rentals were derived from leading multinational corporations and approximately 39.4 percent from Fortune 500 companies.

Shishir Baijal, Chairman & Managing Director, Knight Frank India believes that REITs will allow greater participation from retail investors in the asset class.

"The commercial office space segment has been growing from strength to strength over the past few years with sustained growth in rentals across prime business districts. We expect this momentum to regain in the near future which would encourage more participants to enter the REITs market and improve the fund flow into the sector,” Baijal said.

First Published:Aug 7, 2020 11:29 AM IST