Blackstone-Backed REIT Said Delayed on Indian Investor Disputes

  • Embassy planning to seek $600 million from trust listing
  • Investors in Bengaluru office parks oppose inclusion in REIT

Embassy Group, an Indian partner of Blackstone Group LP, is facing a potential roadblock to its listing of the nation’s first real estate investment trust amid disputes with investors in two of its properties, people with knowledge of the matter said.

Embassy Group has been planning to seek about $600 million listing a trust backed by properties including Embassy GolfLinks and Embassy Manyata Business Park, which count Rolls Royce Holdings Plc and Microsoft Corp. as tenants, the people said. Kelachandra Group and Manyata Group oppose the inclusion of the two Bengaluru office parks in the REIT, according to the people, who asked not to be identified because the information is private.

Those two developments, which Embassy holds through a joint venture with Blackstone called Embassy Office Parks, generate the most rental income among the five to six assets planned for inclusion in the REIT, the people said. The disagreement with Kelachandra Group, a holder of Embassy GolfLinks, and Manyata Group, which has a stake in the eponymous business park, would need to be resolved before a deal goes ahead, the people said.

The Embassy offering would become the first REIT listed in India since the securities regulator established rules for the asset class in September 2014. Investors including the Employees Retirement System of Texas have expressed interest in gaining exposure to the Indian property market through listed REITs.

New Regulations

Embassy has applied to the Indian securities regulator to begin work on the REIT, Embassy Office Parks CEO Michael Holland said in an interview earlier this month. Embassy had aimed to file a prospectus in December, one of the people with knowledge of the matter said.

“No decision has been taken to proceed or to withdraw from the REIT listing process, no decision has been made on which assets would be included,” Holland said in an e-mailed response to Bloomberg queries Tuesday. “The scale of any possible REIT is not yet defined and there are no disputes with any shareholders.”

The company has been awaiting clarification on certain regulations and the decision to go ahead with a REIT takes into account many factors, including announcements in the forthcoming budget, according to Holland. A representative for Blackstone didn’t respond to a request for comment.

Cardamom, Rubber

Kelachandra Group, founded by K. Joseph and his sons in 1980, also owns coffee, cardamom and rubber plantations and is setting up a steelmaking venture with Chinese investors, according to its website.

One of the sons, K.J. George, now controls the company, the people said. George, a minister in the Karnataka state government, said by phone Wednesday that Kelachandra Group is in preliminary discussions about moving Embassy GolfLinks into the trust and no decisions have been reached so far.

International Business Machines Corp. and Monsanto Co. are among companies that lease space in Embassy Manyata Business Park, the project’s website shows. Reddy Veeranna, the owner of Manyata Group, didn’t immediately respond to an e-mail and phone calls seeking comment.

Blackstone has invested about $2.7 billion in Indian real estate since opening an office in the country in 2005. It formed the joint venture with Embassy in 2012.

— With assistance by Saritha Rai

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