Mindspace REIT gains 10% on debut, units worth Rs 800 cr change hands

Hits an intra-day high of Rs 307 and a low of Rs 300 on NSE, before closing at Rs 303 a unit

Mindspace Business Parks REIT (real estate investment trust) settled with a gain of 10 per cent over its issue price during its trading debut on Friday. Units of the K Raheja and Blackstone-backed REIT closed at Rs 303, compared with the issue price of Rs 275.

It hit an intra-day high of Rs 307 and a low of Rs 300 on the NSE, where units worth over Rs 800 crore changed hands. The Rs 4,500-crore initial public offering (IPO) of Mindspace REIT was subscribed 13 times. The good listing and strong demand in the IPO, coupled with regulatory easing, are expected to encourage more players in the cash-starved real estate sector to look at REITs as fund-raising avenues.

Mindspace is the second REIT to list in India after Embassy Office Parks, which made its debut in April 2019. Units of Embassy REIT, also backed by Blackstone, currently trade at Rs 378, with a gain of 26 per cent over their issue price of Rs 300.

Both Mindspace and Embassy operate in the commercial office space, which has attracted significant interest from global investors over the years. Canadian firm Brookfield Asset Management, which has invested in Mumbai’s plush BKC business district, is expected to be next in line to launch a REIT.

 

 

“The commercial office space segment has been growing 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,” said Shishir Baijal, chairman and managing director, Knight Frank India.

Some people had expressed concerns over demand for commercial office space because of disruptions caused by the Covid-19 pandemic. However, experts say marquee office spaces haven’t been impacted much.

“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 favour with the retail investor. This listing will augur well for future investments in asset backed financial products and commercial real estate in India,” said Sharad Mittal, CEO, Motilal Oswal Real Estate Fund.

Market players said investors are drawn towards REITs as they offer a mix of both equity and fixed-income.

“From a long-term perspective, REIT is a good asset class as it offers similar or better post-tax yields than fixed-income and an opportunity for capital appreciation. However, given the increasing trend of work from home, there are some concerns about the company and the commercial real estate segment in the short to medium term, as absorption may remain low in the near future,” said Yash Gupta, equity research associate, Angel Broking.

Ahead of its IPO, Mindspace REIT had raised over Rs 1,500 crore from over 50 anchor investors, including two Singapore sovereign wealth funds, Fidelity, Nomura, and HSBC.