Phoenix to list realty trust on S'pore exchange

Following in the footsteps of real estate players to list real estate investment trusts (REIT) on the Singapore Stock Exchange (SGX), Atul Ruia-promoted Phoenix Mills is planning to list a real estate trust with a corpus of $2 billion to $3 billion, on the SGX to fund its ongoing and future projects.

The company will initially raise an off-shore fund of $300 million on the Singapore Stock Exchange (SGX) and once its assets start giving yields, in the next 2-3 years, it will list a REIT on the SGX, company sources said.

"We are preparing a blueprint for the fund raising and are yet to get the board's consent. The intention is to maximise the wealth of our shareholders," said a senior company executive who did not wish to be identified.

Companies enjoy certain tax benefits under REIT structures, but are required to distribute 90 per cent of their income, which may be taxable in the hands of the investors. The REITs were designed to provide a structure for investments in real estate, just as mutual funds provide for investments in stocks.

The country's largest realty companies, DLF and Unitech, have announced plans to list REITs on the SGX following the absence of REITs in the country, geographical proximity to the country and better valuations.

According to reports, another Mumbai-based developer Indiabulls Real Estate is planning to list its upcoming properties at Jupiter, Elphinstone Mills in Mumbai as REITs.

While DLF Assets has plans to raise nearly $2 billion through a REIT on SGX, Sanjay Chandra's Unitech is planning to raise $2 billion to 3 billion to fund its projects and expansion plans.

Another Bangalore-based developer Embassy Group is in the process of listing a REIT on the exchange. The Singapore-based Ascendas has already raised $500 million through a REIT on the SGX.

Indian real estate developers can raise nearly $20 billion from Singapore Stock Exchange, according to real estate industry estimates.

Though the capital market regulator Securities and Exchange Board of India (Sebi) was considering proposals to allow real estate investment trusts (REIT) in the country, stock market analysts believe that REITs would take at least a year or two considering issues with titles, valuations and calculation of net asset values in the country.

"Singapore is a logical progression due to its geographical proximity and prospects for better yields. While we have to give 12 to 13 per cent returns to investors in India, we can make it with 6-8 per cent for investors in Singapore as REITs are mostly subscribed by insurance funds, pension funds and others who are content with minimum returns,'' said the company executive.

Phoenix Mills raised nearly Rs 1,300 crore in August this year, through qualified institutional placement of shares with global private equity majors such as Barclays Capital, Citigroup, HSBC Financial and DB Fund Mauritius, and a 24 per cent stake sale to real estate funds, Alpine Capital and Bluerich Fund.

"Private equity generally comes at the beginning of a project and exits after the project is completed, whereas in case of REIT, the equity enters once the cash flow from the project starts," said a consultant from a global consultancy, explaining the move.

The company is also looking at acquiring stakes in developers in tier-II cities or entering into joint ventures.

Phoenix Mill's promoter Atul Ruia holds a stake in Indore-based developer EWDPL and plans to jointly develop malls.

The company recently acquired 60 per cent equity stake in Uttar Pradesh-based Big Apple Real Estate, the owners of the United Malls brand.

"We are also exploring JVs in other cities such as Kanpur, Lucknow and Raipur. The idea is to have a national presence," the company executive said.

The company which transformed the closed Phoenix Mills into High Street Phoenix, a shopping destination, is also developing similar mixed use retail and leisure-led realty projects called 'Market City' in Mumbai, Bangalore, Chennai, Pune, Raipur and other tier I & II cities.

Through its wholly owned subsidiary Pallazzio Hotels & Leisure, Phoenix Mills is developing Shangri-La Hotels and Resorts to operate and manage their upcoming hotel at Lower Parel in Mumbai.

Atlas Hospitality, another Phoenix Mills subsidiary, is developing luxury hotels at Pune, Bangalore, Chennai, Mumbai and Agra, having nearly 300 rooms each.

The company is currently developing nearly 45 million sq feet of land throughout the country.

It is planning to develop nearly 75 million to 100 million sq feet of land in the next couple of years on its own and through joint ventures, the executive said.

The shares of Phoenix Mills closed at Rs 2,420, a rise of 2.29 per cent compared with the previous close.

PHOENIX ONBOARD

Under REIT structures, companies enjoy certain tax benefits but are required to distribute 90 per cent of their income, which may be taxable in the hands of the investors

REIT was designed to provide a similar structure for investment in realty as mutual funds provide for investment in stocks

Both the country's largest realty companies "" DLF and Unitech "" have announced their plans to list REITs on the SGX following the absence of REITs in India, geographical proximity to Singapore and better valuations derived by their assets there