Realty major DLF on Saturday said that its rental arm DCCDL will be completely ready in the next one year for launch of Real Estate Investment Trust REIT but the timing of public issue will be decided by its shareholders based on market conditions. DLF Cyber City Developers Ltd (DCCDL) is a joint venture between DLF Ltd and Singapore sovereign wealth firm GIC. While DLF holds 66.67 per cent stake in the JV, the GIC has 33.33 per cent shareholding.
''We should be completely REIT-ready in four quarters from now,'' DLF's new CEO Ashol Tyagi told investors in a conference call to discuss annual result for FY21. In January this year, DCCDL had appointed Shardul Amarchand Mangaldas & Co as legal advisor, Morgan Stanley as banker and KPMG as financial/tax advisor to create right corporate and capital structures in place for proposed launch of REIT. Tyagi said discussions are being held with these advisors to create tax efficient corporate structure for the proposed REIT. ''The timing of the launch of REIT will be decided by the two shareholders (DLF and GIC),'' Tyagi said.
A decision is yet to be taken whether to include retail portfolio in the REIT structure or to have only office assets, he added. The DCCDL has rent-yielding commercial assets (office and retail) of more than 35 million sq ft, with about Rs 3,500 crore annual rental income. Talking about performance of the DCCDL, DLF's MD (Rental Business) Sriram Khattar said about leasing agreements of 1.6 million square feet will expire this fiscal year, of which 75-85 per cent are likely to be renewed.
Khattar said the vacancy rate of office space may go up by 1-2 per cent because of an adverse impact of the second wave of COVID pandemic.
He expects the leasing momentum to pick up with aggressive roll out of vaccination programme.
Khattar also believes that the impact of Work from Home on office demand would be largely compensated by de-densification of workspace. He said there have no drastic reduction in monthly rental.
Khattar also expressed confidence that the DCCDL's annual rental income would reach Rs 4,500 crore over the next three years. In December 2017, DLF had formed a joint venture with GIC after its promoters sold their entire 40 per cent stake in the DCCDL for nearly Rs 12,000 crore. This deal included sale of 33.34 per cent stake in DCCDL to GIC for about Rs 9,000 crore and buyback of remaining shares worth about Rs 3,000 crore by the DCCDL. In India, there are three listed REITs -- Embassy Office ParksREIT, Mindspace Business ParksREIT and BrookfieldIndia Real Estate Trust.
The first REIT of Rs 4,750 crore issue size was listed in April 2019 by Embassy group and Blackstone backed Embassy Office Parks. In August last year, K Raheja and Blackstone backed Mindspace Business Parks launched the country''s second REIT to raise Rs 4,500 crore. Global investment firm Brookfield has listed the country's third REIT after raising Rs 3,800 crore through IPO. Real estate investment trust (REIT), a popular instrument globally, was introduced in India a few years ago aimed at attracting investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enable retail participation.