Deal Closed | K Raheja Corp Investment Managers LLP |Initial offering of units by Mindspace Business Parks REIT

The details of the deal are: 

Sector/Industry: Real Estate – Commercial leasing    

Stage and date: Listing, 7th August 2020

Name of the client: K Raheja Corp Investment Managers LLP

(Investment Manager of Mindspace Business Parks REIT)

Issue size:  Issue size of INR 45,000 million, comprising of a fresh issue of units of the Mindspace Business Parks REIT aggregating up to INR 10,000 million and an offer for sale of the units by certain selling unitholders (such selling unitholders included Blackstone)

Role of the firm: Indian Legal Counsel to the Book Running Lead Managers

Names of Merchant Bankers/BRLMs/ GCBRLMs: 

• Morgan Stanley India Company Private Limited;
• Axis Capital Limited;
• DSP Merrill Lynch Limited;
• Citigroup Global Markets India Private Limited;
• JM Financial Limited;
• Kotak Mahindra Capital Company Limited;
• CLSA India Private Limited;
• Nomura Financial Advisory and Securities (India) Private Limited;
• UBS Securities India Private Limited;
• Ambit Capital Private Limited;
• HDFC Bank Limited;
• IDFC Securities Limited; and
• ICICI Securities Limited

Team members on the transaction: Sudhir Bassi (Partner), Subhayu Sen (Partner), Aayush Mohata (Principal Associate), Aparna Bagree (Senior Associate), Raghav Bhatia (Associate) and Tishita Mukherjee (Associate)

Other Counsels on the Deal: Shardul Amarchand Mangaldas & Co – Indian legal counsel to the Mindspace Business Parks REIT, the Investment Manager, the Trustee, Sponsors and the K Raheja Selling Unitholders, Shardul Amarchand Mangaldas & Co – Indian legal counsel to the Blackstone Selling Unitholders and Sidley Austin LLP – International legal counsel to the Offer

Unique features of the transaction: 

• This is the second REIT IPO in India and the first REIT IPO on which Khaitan & Co has advised on.
• This is the first IPO of REITs which includes an offer for sale component. Blackstone and certain K Raheja entities exited the portfolio through the offer for sale.
• Unlike the previous IPO of units by Embassy Office Parks REIT, where assets were contributed only by  the Sponsor Group and units were  issued to them, in this transaction, units were issued to the private equity investor (certain Blackstone entities - who are investors in asset SPVs being acquired) and they  participated in the OFS as selling unitholders.
• The REIT, which depends on rental income from commercial real estate properties, was successfully closed during the Covid – linked lock down and the IPO was subscribed 13 times.
• While it was not evidently clear from the REIT Regulations but was clarified by SEBI during the transaction – (a) the eligibility test to be met by a company or LLP before it could be considered to be a “special purpose vehicle”, had to be met on a standalone basis and (b) the requirement that not less than 80% of value of the REIT assets is required to be invested in completed and rent and/or income generating properties, had to be met on a combined basis at a REIT level.
• The SEBI (Real Estate Investment Trusts) Regulations, 2014 mandate for the valuation to be conducted by a valuer who is registered under the Companies Act, 2013. However, none of the large real estate valuation firms are registered as registered valuers, hence the valuation was conducted by Mr Shubhendu Saha, a registered valuer. Mr Saha’s report was prepared by drawing inputs from the macro and market data provided by Cushman & Wakefield, the Independent    Industry Expert.