Blackstone to sell half its REITs stake to Bain Capital

Globally, the US based private equity (PE) fund Blackstone has a very strong real estate franchise and it is no different in India. However, now Blackstone is planning to monetize some of the holdings in real estate investment trusts (REITs). Blackstone plans to sell half of its holdings in the Embassy Office Parks REIT to Bain Capital; another leading global PE fund. Incidentally, if the deal happens, it would mark the first RIET foray for Bain Capital.

With COVID scare over and employees getting back to office, the demand for office space has been picking up rapidly. Even as Blackstone looks to monetize some of its REIT holdings and reallocate to other classes, it offers the perfect sweet spot entry point for Bain Capital. Neither Bain Capital, nor Blackstone have confirmed or denied the transaction. However, the plan is to execute the entire transaction via block deals on the stock exchanges in next few weeks.

In India, REITs are only permitted in office properties and not in residential properties. REITs are like mutual funds with a portfolio of commercial realty assets. Embassy Office Parks pioneered REITs in India in 2019 and currently owns and operates over 43.2 million SFT of office parks and buildings across Bengaluru and Mumbai. 

As of date, Blackstone owns 24% of Embassy REIT, with market cap of nearly $4 billion. Blackstone plans to sell 10%-12% stake worth $400 million-$480 million. This will mark the fourth sale of stake in the REITS by Blackstone in the last 4 years having already sold Embassy REIT shares worth $1.4 billion. Blackstone now plans to reallocate to newer asset classes like data centres, where returns are higher. Blackstone has already invested over $11 billion in Indian companies and assets in the last few years.