MUMBAI: Credit rating agency ICRA has assigned rating of Provisional (ICRA) AAA with stable outlook to the first Real Estate Investment Trust (REIT) to be launched in India.The assigned Provisional [ICRA]AAA rating draws strength from the large and diversified leasing portfolio of Embassy REIT, which is spread across multiple office parks in different cities.
The business profile is further enhanced by the diversified tenant base in the office parks, which comprises of leading multi-national and domestic corporations, said Shubham Jain, Group Head at ICRA.Sponsored by entities belonging to Blackstone Group and Embassy Property Developments, Embassy Office Parks REIT (Embassy REIT) is the first SEBI registered REIT to file draft offer documents for a public listing in India.Embassy Office Parks, a joint venture of US private equity firm Blackstone Group and Embassy Group, is to file documents with the Securities and Exchange Board of India (Sebi) today, proposing to raise over Rs 5,000 crore through this route.Apart from being Indias first, this REIT will be Asias largest in terms of office portfolio area, more than twice the size of others in the continent.
With this, India will join the league of global REIT markets such as the US, the UK, Singapore, Japan Australia and Canada.Embassy Office Parks will list 33 million square feet of office real estate portfolio under the REIT.
Of this, an area of 24 million sq.
ft.
has been completed and has of 95% occupancy.
The remainder is under construction.According to Jain, the rating also benefits from the low initial leverage in the REIT group, which will be aided by prepayment of outstanding using the net proceeds from REIT listing.ICRAs credit assessment of a REIT is based on a consolidation of the business and financial risk profile of the REIT with that of its special purpose vehicles (SPVs).
Moreover, the REIT regulations impose certain restrictions on the operational and financial profile of a REIT, which favourably impact their credit profile.
These include mandatory distribution of 90% of the available free cash flows at SPV level, cap on under-construction area in the portfolio to 20% by asset value, and limit on permissible leverage to 49% of asset value.