Mindspace Business Parks REIT Review

Mindspace REIT IPO opens from 27 July 2020 to 29 July 2020. Mindspace Business Parks REIT, is the second REIT (Real Estate Investment Trust) in the country to aim at a public listing and aims to raise up to ₹1,000 crore of fresh capital, while its owners K Raheja group and Blackstone will together sell units worth ₹3,500 crore through the IPO. The total size of the deal to ₹4,500 crore. in the price band of Rs. 274 to Rs. 275 per unit.

Issue dateJul 27 – Jul 29, 2020
IPO Price₹274 to ₹275
Market Lot200 Shares
Min Bid Quantity200 Shares
Issue DetailsFresh issuance of Units upto ₹ 1,000 Cr
 + Offer for sale of upto ₹ 3,500 Cr
Issue Size (₹. Cr)Up to ₹ 4,500 Cr
Strategic Investors4.09 Cr Units  (₹ 1,125 Cr)
Net offer~12.27 Cr Units  (₹ 3,375 Cr)
   Institutional Investors75% of Net offer,  ~9.20 Cr Units, ₹ 2,531 Cr
   Non Institutional Investors25% of Net offer, ~3.07 Cr Units, ₹ 844 Cr


See subscription Details in the related Post: Mindspace Business Parks REIT Brokerage View & subscription

About REIT

REITs are investment vehicles that can be used by real estate players to attract private investment, while investors (both retail and institutional) can gain dividends generated from income-producing real estate assets like office buildings, shopping malls, etc. They are similar to mutual funds which provide opportunity to invest in equity stocks, whereas REITs allow one to invest in income-generating real estate assets.

Sebi had notified REIT’s regulations in 2014, allowing setting up and listing of such trusts, which are popular in advanced markets. SEBI requirements mandate

  • REIT must invest not less than 80% of the value of its assets in completed and rent and/ or income generating properties.
  • Not more than 20% of the value of its assets may only be invested in certain permitted forms of investments which include, among other things, under construction properties, completed but not rent generating properties, listed or unlisted debt of companies etc.
  • minimum of 90% of net distributable cash flow to be compulsorily distributed among unit-holders, once every 6 months.

Mindspace Business Parks REIT: Pre Issue Placement

Mindspace Business Parks REIT, owned by K Raheja group and Blackstone, has raised Rs 1,125 crore from investors including Singapore sovereign wealth fund GIC Pte Ltd ahead of its initial public offering. Other investors who bought Mindspace REIT units include US-based Capital Group, Singapore state firm Temasek-owned Fullerton, insurance company N TUC Income,among others. The real estate investment trust allotted a total of 40.9 million units to the investors.

Anchor Investors

Ahead of its IPO, Mindspace Business Parks REIT has raised nearly Rs 1,519 crore from 54 anchor investors including sovereign entities, insurance companies and mutual funds. These include Government of Singapore (239 cr), Capital Research, Nomura,HSBC Global, Cohen & Steers and Fidelity, IIFL, Fidelity Management & Research, Fullerton, HDFC Life Insurance, SBI Life Insurance, Axis MF, ICICI Prudential MF, Schroders, Key Square, Prusik, Morgan Stanley Investment Managers, Max Life, Birla Life etc.

About Mindspace Business Parks REIT

  • Cape Trading LLP (CTL) and Anbee Constructions LLP (ACL) are the sponsors of Mindspace REIT.
  • K Raheja Corp Investment Managers LLP (held by Mr. Ravi C. Raheja and Mr. Neel C. Raheja, as the partners) has been appointed as the Manager to Mindspace REIT.
  • Axis Trustee Services Limited is the Trustee to Mindspace REIT.
  • Mindspace Business Parks REIT owns a quality office portfolio located in four key office markets of India.
  • Mindspace Business Parks REIT has a portfolio of 29.5 million sq ft of commercial properties located in major cities such as Mumbai, Pune, Chennai and Hyderabad,. 
  • The  Portfolio comprises 23.0 msf of Completed Area, 2.8 msf of Under Construction Area and 3.6 msf of Future Development Area, as of March 31, 2020. Its Portfolio has five integrated business parks with superior infrastructure and amenities (such as restaurants, crèches and outdoor sports arenas) and five quality independent offices. 
  • As of March 31, 2020, its Portfolio was well diversified with 172 tenants and no single tenant contributed more
    than 7.7% of Gross Contracted Rentals.
  • Furthermore, as of March 31, 2020, approximately 84.9% of its Gross Contracted Rentals were derived from leading multinational corporations and approximately 39.4% from Fortune 500 companies. Its tenant base comprises a mix of multinational and Indian corporates, including affiliates of Accenture, Qualcomm, BA Continuum, JP Morgan, Amazon, Schlumberger, UBS, Capgemini, Facebook, Barclays and BNY Mellon.
  • Its Portfolio is stabilized with 92.0% Committed Occupancy and a WALE of 5.8 years, as of March 31, 2020,
    which provides long-term visibility to its revenues. Weighted Average Lease Expiry (or weighted average lease to expiry), is a metric used to measure a property portfolio’s risk of going vacan

Mindspace Business Parks REIT: Financials

INR MnFY 2021EFY 2022EFY 2023E
Revenue from Operations 17,14121,08024,023
Facility Rentals13,38216,70918,862
NOI (Net Operating Income )13,48717,07419,514
% of total revenue79%81%81%
NOI growth10%27%14%
NDCF (Net Distributable Cash Flow)5,73912,23113,061

Summary of Income Statement :
Particulars (INR Mn)FY18FY19FY20
Revenue from operations12,63114,31617,660
Other income2,3912,4812,602
EBITDA (Excl. Other Income)7,85810,13311,116
Profit for the period / year attributable to the owners1,4834,7894,747

Mindspace vs Embassy: Broad Comparison

  • Embassy REIT was a 100% fresh issue. 75% of current IPO is OFS portion wheras mere 1000 cr. is the fresh portion in Mindspace REIT. Thus more money was used in Embassy REIT towrds debt reduction.
  • Blackstone had a much higher stake in Embassy REIT. Even after trimming its stake by 8% holding in June 2020, Blackstone still holds 46% stake in Embassy REIT.In Mindspace REIT, Blackstone is only a minority shareholder with 15% stake whoch will go down to 10% post IPO.
  • Embassy REIT IPO was issued at Rs 300. Shares of Embassy Office Parks REIT closed at ₹314.10 a piece on BSE, a 4.7% premium over the issue price on the listing day. It hit a high of Rs. 465 in early march and thereafter tiook a severe beating and even touched Rs. 301. It slowly recoved and has recently seen an supsurge and is currently quoting at Rs 366 (22% premium).
  • The expected distribution of Rs. 19.39 from Mindspace Business Parks REIT is lower compared to that of Embassy. On the issue price of Rs. 275 this works to be 7%. Embassy ad indicated around 7-8 per cent yield at the time of issue.
  • Comparing with actual figtures for Embassy REIT , it declared a distribution of Rs 5,317 million or Rs 6.89 per unit for 4Q FY2020. The cumulative distribution for FY2020 totals Rs 18,821 million or Rs 24.39 per unit. Embassy was priced ₹300, with distribution per unit of ₹24.39 i.e. 8.1 % yield on issue price. On current price of Rs. 366, the yiled works out to be 6.7%.

Mindspace Business Parks REIT : Cons

  • The valuation reports for Mindspace Business Parks REIT REIT Portfolio are based on various assumptions and may not be indicative of the true value of its assets.
  • REIT is a new product.
  • Yields may be affected by slowdown in the economy and adverse government regulations.
  • Rise in interest rate
  • The complete extent of pandemic’s impact on REITs business and operations is currently uncertain and its effect on business and operations in the medium to long term will depend on future developments, including the scope, severity and duration of the pandemic.

Mindspace REIT: Yield Guidance

The Yield many be around 7 -7.1% for FY 21 and estimated yield for FY22 may be about 7.5%.This is likly to be in form of quartetly distributions. will be paid in 4 quarterly installments as against mandated half yearly payouts by SEBI regulations for REITs.


  • Investors incur tax only on the interest component of REIT distributions.
  • No tax on REIT distributions in the form of dividends
  • Capital Gains: Short Term Gains if less than 36 months will sttract 15% tax and Long term 10%^; Indexation is available after 3 years of investment.

Mindspace Business Parks REIT : Assessment

  • REIT is an investment tool that owns and operates rent-yielding real estate assets and allows individual investors to make investment in this platform and earn income.
  • This is the second IPO of a REIT in the country, the first one Embassy REIT came in the year 2019 and has done well.
  • COVID- 19 pandemic has affected Mindspace REIT’s operations with many tenants limiting their operating staffand hours while others opting to work from home. There has also been interruption in construction activities at its underconstruction sites
  • While Mindspace REIT’s properties were not fultv occuped by tenants in April and Mav 2020, the REIT has been maintaini ng and managing them and the rent receipts during these two rnonths was 97.8% and 95.2%.
  • As of May 31, 2020, committed occupancy in Mindspace REITs Portfolio was 92. 4% and it not seen a significant drop in in the rent receipts.
  • While Blackstone owns a major holding in Embassy it holding in Mindspace REIT is quite less.
  • The promoters K Raheja Hroup has considerable interests in Hospitality, retail, real estate which are the sectors under acute stress due to covid-19.
  • Listed listed group companies Shoppers Stop and Chalet Hotels have not done very well on the bourses. In bothh these companies promoters have pleged some of their holdings.
  • The roposed Debt Post Issue has been indicated as INR 36,140 Mn which is 15.3% of Market Value
  • SEBI has changed rules to a minimum investment limit in 200 units for attracting more retail participation. When the earlier Embassy REIT came up, investors needed to invest in minimum 800 units. Thus Mindspace Business Parks REIT issue is likely to attract greater retail interest and given the size of Rs. 884 crore in total for NII and Retail it should get suscribed.
  • Good response to Mindspace REIT anchor issue was led by foreign institutional investors (FIIs) such as the government of Singapore, Nomura, Capital Group, Fidelity, HSBC whoich indicates that the Mindspace Business Parks REIT could garner good subscription.
  • The REIT issue stands nearly 59% subscribed based on both strategic and anchor investments.
  • It is gathered that there no substantial activity in Grey Market for Embassy Office Parks REIT issue.
  • The product should not be expected to give equity like returns & returns expectation should be moderated to return level of 7-8%. The product may however be suitable for those looking for an Alternate investment platform and diversification of portfolio. Further dividend income from REIT is taxfree in hand of investors.
  • REIT is a new instrument and the robustness of SEBIs guidelines and rules is yet to be proven.
  • COVID-19 poses challenge and the projections could go haywire, but with passage of time, Mindspace REIT would offer a steady return structure.
  • The yields in Debt market despite COVID 19 issues have moved down and make help to attract funds to Mindspace Business Parks REIT issue.
  • Despite looking some what inferior to Embassy REIT ( see the comparison in the section above) on many counts and mainly track record of promoters, as of now, I am likely to susbscribe to the Mindspace REIT. This is primarily to diversify one’s portfolio, Tax benefits as dividend will tax free and provide some exposure to this instrument which is a proxy to investment in income generating commercial real estate sector. There is need to keep watch on subscription figures while doing so.

Standard disclaimer: I am not a SEBI registered analyst /investment adviser and above analysis is for educational purpose only. However I have passed NISM certifications for Investment Adviser and Mutual Fund Distributor with decent scores. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.

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