LIC logs into Sattva, Blackstone-backed Knowledge Realty Trust REIT

Bengaluru-based Sattva Group and Blackstone-backed Knowledge Realty Trust REIT has seen huge interest from the institutional investors ahead of its IPO with insurance giant Life Insurance Corporation (LIC) picking up nearly ₹100 crore worth of stake along with  Tata AIG General Insurance picking up stake worth ₹150 crore, implying 6.16% and 9.26% in the portion reserved for anchor investors, according to filing to the exchanges.

According to company sources ahead of the public issue, Knowledge Realty Trust REIT has seen 70% valued at ₹4,220 crore already committed, with ₹1,620 crores from anchor investors and a strategic allocation of ₹1,200 crore. Earlier, the company had raised a pre-IPO round of ₹1,400 crore.  Insurance and Funds have seen nearly 45 % of the allocation in the anchor portion with names like Tata AIG, Nippon MF, Axis MF, Tata MF, FT MF, Amundi, Wells Capital, PIMCO, SBI Pension and Jhunjhunwala Trust among others. The High Networth Individuals (HNI) pre-IPO round investments include those of RK Damani, Karan Bhagat Trust, and 360 One Office, among others.

With properties like OneBKC, One Unity Center and One World Center in Lower Parel, Knowledge Realty Trust CEO Shirish Godbole said that with nearly 31% of the portfolio being in Mumbai gives an edge over the other REIT players with more city-centric properties.  Also, learning from the past REIT has made them take a cautious approach to SEZ properties given the increasing interest of companies to move out of SEZ zones owing to existing rules. “So, if you look at the other REITs and you look at the percentage of their space that is occupied by SEZ space, you will see it's quite large, 30 to 50% of their total square footage. Whereas in our case, it's only one 15%. What we have intentionally done is try to cut down or limit the amount of SEZ space and have a lot more front office space. These are two big variables and differentiators when you look at the other competitors,” he said.

According to the company’s offer documents, the portfolio had a Committed Occupancy of 89.9% as of December 31, 2024, with a rental assets tenant base of 75.8% from multinational tenants, 44.5% from GCCs and 38.6% from Fortune 500 companies for the month ended September 30, 2024. The properties across the cities have tenants  like Amazon, Cisco and Franklin Templeton Asset Management (India) Private Limited, Apple, Google Connect, Novartis and Goldman Sachs, Star India Pvt Ltd and Aditya Birla. While Sattva Sponsor also has about 7 million sqft of new real estate under the Right of First Offer (RoFo) to the REIT bucket, Shivam Agarwal, Board Member, Knowlege Realty Trust, said that the current projected growth and the CAGR and returns do not factor in the acquisitions. “There is a clear pipeline and it's 7 million square feet now, but this (draft prospectus) was filed in September, and we are ongoing development company, so that's even more assets now,” he said.

The REIT expects to generate a 16.5% Revenue from Operations CAGR (over a two-year period from FY2025E to FY2027E with the having a tenant retention rate of 63.5% from FY2022 to H1FY2025 according to the offer documents. On the company’s future acquisition strategy, Quaiser Parvez, COO, Knowlege Realty Trust, said that it would be open to third-party assets, beyond the RoFo assets of Sattva. “We also want to keep our eyes very close to the ground in terms of our embedded growth. The embedded growth on the portfolio again is a very characteristic of something which is very unlike peers , the 13% NOI CAGR, in the next four years through all the lowest variables is something that we'll keep focusing on,” he said.

The ₹6,200 crore REIT opens on Tuesday (August 5) and closes on Thursday (August 7) and has 30 office assets across 6 cities including Hyderabad, Bengaluru and Mumbai and is the largest REIT issue with Net Operating Income (NOI) and Gross Asset Value estimated at around ₹60,000 crore.