Is Indias Largest Office Reit Worth Your Money Blackstone Backed Krt Reit Ipo Explained

TITLE: Is India’s Largest Office REIT Worth Your Money? | Blackstone-Backed KRT REIT IPO Explained CHANNEL: Mint DATE: 2025-07-30 ---TRANSCRIPT--- [Music] Should you invest in India’s largest office REIT IPO knowledge realy trust or KRT REIT sponsored by Blackstone and Satwa Group opening for subscription on 5th August 2025 now is KRT REIT worth your money after all earning rental income in the form of dividends from landmark office buildings like one BKC one world center in Mumbai knowledge city and knowledge park in Hyderabad and Bengaluru seems like A mouthwatering opportunity, but is it really? What are the returns you can expect? Let’s decode on Let’s Get Real. [Music] Now, for those of you who have never invested in a REIT or a real estate investment trust, here’s a short explainer. And for those of you who already know what REITs are, treat this as a quick refresher. Now, REITs or real estate investment trusts let you invest in commercial properties like offices and malls without buying them directly. Honestly, investors like you and I can’t even afford that. In a REIT, you will also earn regular income through dividends from rent collected and gain from rising unit or share price. So, it’s somewhat like debt and somewhat like equity. Now, REITs in India are regulated by SEBI making them easy to buy, sell and track like any stocks. Currently there are three office reets listed on both NSC and BSC. Embassy office parks, Mindpace Business Parks and Brookfield India REIT. Now with a REIT you can own a piece of India’s best office buildings, enjoy steady dividend income and ride the wave of commercial real estate growth. But and here’s the big butt, not all REITs are equal. And even though all three listed office reads own India’s top gradea office assets in some of the key gateway cities of India like Mumbai, Bengaluru, Delhiensia, returns have since their listing have been quite varied. In fact, they vary from as low as 8% to as decent as 13 and a half 14%. So just like stocks reads demand an entry at a fair valuation. You cannot get into them at any price or any time. Now let’s get to understanding what’s on offer by knowledge realy trust or KRT REIT. The IPO opens next week on Tuesday 5th August and will close on Thursday August 7th. The price band set for KRT rate IPO is 95 to 100 rupees. Lot size is 150. Now as a retail investor you can invest as little as 15,000 rupees going up to 2 lak. If you’re an HNI you can invest 10 lakh rupees and above. The IPO intends to raise a total of 6,200 cr rupes out of which 1,400 cr rupes has been raised through preIPO route. What is in it for retail investors? Well, 900 cr rupes has been kept aside on offer for retail investor. Knowledge really trust REIT is being positioned as the largest office re in India by gross asset value which is around 62,000 cr rupes and net operating income which in FI25 was around 3,432 cr rupees. It’s also the most geographically diversified reach owning 29 assets across six cities and a majority of these are located in Mumbai, Bengaluru and Hyderabad almost 95% and they have Fortune 500 clients like Amazon, Apple, Google, Cisco, Goldman Sachs with a very healthy 91% occupancy. Joining me for a deep dive we do the KRT REIT IPO are Ashish Mota. He’s a senior MD real estate Blackstone. We also have with us Vijay Agarval, MD Satwa Group and Shirish Kohles, CEO of KRT Reed. Gentlemen, thank you so much for joining me. Now Ashish, I’m going to start with you. Undoubtedly the portfolio looks really commendable, but give me the finer details. Um, why is it different from other listed reads because all of them claim that they have the best gradea portfolio?

So, thanks thanks Manisha for having me on the show. Um you know you mentioned a bunch of the highlights uh but I would say you know a few things that you know sort of distinguish uh KRT from the rest highest occupancy amongst all REITs uh highest NOI you know uh highest uh uh GAV for for all assets I think if you look at the the portfolio diversity uh we have 96% uh concentration amongst the three best office markets in India uh across Mumbai, Bangalore and Hyderabad. Today what we’re seeing uh in the office market uh Manisha is that there is a strong growth in the in the global captives uh which is represented by the portfolio that we have in Bangalore and Hyderabad and at the same point of time the domestic economy is spurring a large amount of absorption in front office markets in Mumbai which also comprise a large part of our portfolio. So together between the front office and global captives, you know, we have we capture a lot of the demand trends that we’re seeing uh across across the commercial office market. So that’s uh that’s what’s that’s the that’s the other thing I would say. The third thing I would say across the portfolio is uh you know when you look at the in place rents today you know given that rents are signed between five and 10 years uh uh earlier and the rental growth that we’ve seen in some of these target markets we have almost a 20% marktomarket uh that’s that’s that’s there in the rate today which basically means that as these leases sort of expire you have the ability to get that rental upside which is almost 20 odd percent in our portfolio. So I would say those are the big uh uh differentiators in terms of you know how we sort of think about KRT in respect of other rates. All right. Um I think mindspace has also crossed 91% but 91% is healthy. I remember the time that we spoke during embassy office park reads and occupancy used to be 95%. I’m just so glad it’s crossed 90%. All right, my next question because you’ve already mentioned NOI, you’ve already said uh marktomarket potential of 23%. So, Shish, let me bring you in here. Now, how much of these gains will be passed on to the investor? And the reason I ask, now we are into the fourth rate of fourth office read let me say I look at the compounded NOI growth of the listed reads from their IPO to last quarter. It ranges from 8 to 10%. And then I look at the compounded distribution growth of dividend and it’s only 2 to 3%. Is it going to be different with KRT REIT? Why is there this disparity in what is passed on to the investor? Well, first of all, thank you Manisha. As Ashish pointed out, thank you for having us all. Um, you know, we are going to distribute 100% of our cash flow, right? So, I don’t think there’s a question of not distributing it when it’s available. there have been whether it’s covid whether it’s sezz requirements as you look in the past there have been you know uh I guess non-controllable issues which may have had an effect on some of the growth rates but as we sit today for knowledge realy trust and as we look forward we are very comfortable and confident of where we are and what our projections are and our projections are for 13% each year compounded annual growth right and we’re very very happy and comfortable with it because a lot of it almost 60% of it is actually coming from signed up you know of sort of existing transactions. So we are very comfortable that the 13% will be delivered and with a 7.2% yield going in adding further to that 13% on top we’re very confident that the 7.2 will go up to 7.7 8.2 and so on in the future years. So we’re quite confident of the growth and we are happy uh that we are in a position looking at the markets with a lot of tailwind behind us right now. So dividend distribution dividend yield you’re saying is going to be 7.1 going up to 7.8 if you’re going to pass through the net operating income I mean if I’m just doing a very simple math then I think the investors should look at 15% plus returns. Ashish Moda you want to come in here? Yeah. No, you’re right. Uhuh. Uh Manisha, this is uh you know that’s that’s what you know we we think that this read delivers in terms of absolute returns over time. You have the 7 and a half% odd you know average uh dividend yield and then on top of that you have the growth that sort of comes in from growth in the contractual rents as well as some of the development that sort of comes in into the rates. The third uh segment of the growth which is actually not built into our projections is the fact that we actually have a very lowly levered balance sheet. Uh you know we are at 19% LTV at at our current value. Uh and that gives us a lot of headroom to actually acquire assets u you know going forward. So my my view is you know you would given our portfolio look to hit about 14 to 15% uh absolute returns and then the inorganic growth on top uh which should take you higher than that. Okay, you’ve opened the question and on acquiring assets and you’ve said you will acquire it on from the open markets. So Mr. Agraal, let me come to you. How many of your assets or what percentage of your assets have you moved into the REIT about 50% or so? Around 50% of the assets is moved to the all right and you have a roof on four assets right four marquee assets. Tell me why would you not want to give more of your own portfolio to the REIT and why would you look at the open market in such a competitive environment where every large investor global wants something I mean a great office asset in India and they are becoming harder and harder to get by at the right price. So Manisha thank you for being uh inviting on the show but uh I’ll tell you that Satwa is committed to be all the marquee assets to put it on the read and we have already signed four roof which has been Bangalore, Hyderabad and Chennai the four roof building in market building but this REIT has two purpose also till now in India brand neutral rate has been not come that this read has been purely brand neutral rate is there which is like suppose last two years we are preparing for the read in that thing lots of discussion with the developers the developers is been some HNI has built 2 million square ft but they don’t know how to exit how to be convert this into the unit which is the tax efficient units and some cash flow this read will allow us to be the developers of the residential focus but 2 three million they want to do the commercial building also to be liber to be delock from this this re and apart from that there’s some HNI who build the building but they don’t know how to be get out from the things to be give it on the REIT and then be trapped with the units and the cash flow so this REIT has a unique strategy where you can keep your brand intact and along with the KT brand so that any any person’s desire is that his brand should be there on the re so that way the satwa has been also been committed to so just to add to that Manisha so you know the idea is that the REIT will go out and knowledge realy as you can see is brand agnostic and if there is as Mr. was saying you know a million 2 million 3 million non-strategic owner of assets it’s a very taxefficient transfer to come into the REIT and we’ll allow them to maintain their local branding. So what happens is locally the developer or owner is able to maintain their branding but yet benefit from the structural benefits of tax efficiency etc the dividend yield that a REIT has to offer. That’s I think I just wanted to add that. Okay. So, so that’s the goal and it’s quite interesting because that is a differentiator for this particular read. Uh, shares give me another sense of you know there I’ve spoken to a lot of investors and also studied the current reads. Every time there is a sponsor developer asset moving into a REIT um you know whoever does the valuation shows that it’s actually at a discount to market value but there is really no transparency around that and there’s always a sense that the sponsored developer is actually going to maximize why will he give it at a discount how are you going to as a CEO manage that equation and work in the favor of investor yeah so number one we’re here for the shareholders right the management team’s job is to ensure that we’re making accretive acquisitions. So we are clearly going to be focused on ensuring that we have you know a acquisition that’s going to add to our DPU and not take it down and dilute it. Couple of things number one we have a team which is very well equipped a management team which has all the ability to underride due diligence etc. We will be using third party valuers etc to help us also and the best part is that we’ve got shareholders at two of them uh who are you know the biggest shareholders and they are fully aligned with the smaller shareholders as well right and so if Satwa is adding an asset we’ve also got Blackstone as a shareholder Blackstone’s adding an asset we’ve also got Satwa as a shareholder so I think it’s very uh uh I think it’s very nicely distributed where we have equal weightage amongst all of these shareholders plus a management team that’s obviously capable and going to ensure we do our job to provide accreative acquisitions for the for the re right so I’m very comfortable that I am very comfortable that we’re not going to overpay we are going to be disciplined and we’re going to do the right thing right and and we have the experience and expertise to do that all right I would just add you know on top of that go ahead this is an important question and let me let me also bring in one thing I I mean have you left anything on the table for the investor right now? You’re saying that the valuation of the assets has been at a discount to the market value. But Ashish, I’m going to take you back to also the time when embassy came out with its uh repricing. It was 300 rupees. CBRE said the fair pricing was

360. It’s taken it a long time to actually come back and cross this year in FI25 calendar year. FI uh sorry 2025 that has crossed 360 rupees. So I am kind of grilling you on this thing. But these are my concern areas and through me you need to convince the retail investor how are the assets valued today is there anything for the retail investor and going forward when you bring in new assets that there will be a fair valuation. Ashish take it. So, so Manisha if if I can sort of you know rewind uh back to embassy days uh you did see the stock north of 450 as well uh and then you know you ran into sort of COVID you ran into an interest rate regime which was you know significantly higher than than what you know we what we saw when we sort of launched uh uh embassy read having said all of that I think um you know in in the way we sort of thought about this portfolio our NAV is about 10% discount uh if I look at NAVs of existing comparable reads we’re probably in the zip code of about 5 odd percent. So there is definitely uh more on the table for investors uh uh on a on a relative basis. The second thing I would say which uh you know a lot of investors don’t actually focus on is if you look at this this is really based on you know and I spoke to you about the marktomarket uh uh impact that’s potentially out there today. some of these reads uh or these portfolios are basically valued as per some cap rate on existing rents right to give you a sense if you look at u you know and we have some really mary assets in there but if you look at let’s say BKC as an example we have one BKC um uh as an as an asset in there as per you know the valuations that we have uh uh in in in the book if you look at strata values or strata capital values of properties in BKC trade at we actually at almost at 30 to 35% discount not a 10% discount anyway so so if you you know if you look at the quality of the assets if you look at the rental if you look at the tenants that are in there you know and if you look at their individual capital values there is significantly more value on the table from invest from an investor perspective here

okay fair point now uh Mr. Aaral 50/50 joint venture between the two sponsors Blackstone and Satwa. Who’s going to be in the driving seat? Both. Till now we have been all driving seat. We have been come across of the largest reach. This shows our bonding. This shows our our strength and because the Blackstone brings his global expertise, we bring local expertise. So 1 + 1 is always 11. Okay. uh what is Blackstone’s commitment to the REIT? I mean in embassy you paired down your equity and you’ve gone to zero now Ashish in this what is the long-term plan I mean you still remain the sponsor but there is no equity held what is the road map how long are you committed to be a 50/50 partner in this read you might continue as a sponsor but the 50% partnership look I think uh uh Misha firstly we are long-term believers in the Indian office story right um you know if you look at um you you know starting in 2010 when we started acquiring assets to now we continue to be big believers in that story. Um the other thing that we believe in in India is you know large scalable platforms and I think KRT is a representation of exactly that right and therefore you know in my mind you know while we obviously operate close-ended funds and we have to distribute back to our investors I think over time you will see us scale some of these vehicles uh with assets as we continue to sort of acquire them right so our existing shareholding might go down but we will look to find new opportunities new assets that we own today. Almost all of our uh uh assets are in this uh REIT. However, we do have other joint venture partners who you know for various reasons have not been you know part of this read today. Tomorrow if that changes you know we could potentially bring some of those assets into this read thereby increasing shareholding. So in my mind this is you know this is going to be a pretty dynamic uh uh way our shareholding sort of fluctuates and like I said you know we continue to be big believers in platforms and in some of these asset classes in the longer term. So my view I think we’re here for the long run here. All right gentlemen I’m hearing a 15% plus return. None of the three office listed reads have managed to touch that number maybe briefly but not annualized. If you look at the long-term trends, I’m hoping you will break that jinx for the investor because really it is a fantastic product in terms of financializing the best assets or real estate assets in India and giving the retail uh investor a participation mode. So all the best to all of you. Sharish Kole CEO KRT Reed, thank you for joining me. Ashish Mota always a pleasure to have you of course and uh hopefully Blackstone will take this journey a slightly in a slightly different route you’re saying that you’ll stay longer term is what I’m hearing Vijay Agarwal your debt will be paid you’ll have new fresh capital to do many more things so all the best gentlemen for joining me thank you thank you Manish thank you Manisha that was a conversation with knowledge realy trust management and of course the IPO for all of you is opening on 5th August and closing ing on 7th August. Also remember that the India office real estate is closely related to India’s GCC a global captive center story. India is now called the GCC capital of the world with 58% share in global outsourcing and it has evolved actually from just being a back-end support to now high value core business functions which includes AI, research and design, robotics and digital solutions. If you go back in uh FI10, there were about 700 global captive centers in India. In 2024, they’ve grown to,700. So that’s a big number and is expected to grow more. Now, industry estimates say that India offers up to 80% cost savings for global occupiers. And two things that are working for India is its vast population of English-speaking STEM or technically qualified young workforce. And look at the rent advantage for gradea offices in Bengaluru, Hyderabad, Mumbai. Rents range from$1 to2 to $3 per month per square feet. Visa w 7 to $9 in London and $10 to $14 in Midtown of New York. So that’s a huge advantage that we are talking about and that’s why there is excitement around the office story. Okay, we conclude that. Thanks for joining me on Let’s Get Real. Be sharp. Be informed when it comes to investing your hard-earned money. [Music] [Applause]