Embassy Office Parks REIT’s Bold Expansion: Powering Up Premium Workspace Demand

Embassy Office Parks REIT is gearing up for a significant investment spree, pouring Rs 3,800 crore into completing its ongoing office complexes over the next four years. The aim? To beef up its rental portfolio, particularly in response to the growing demand for top-notch workspace.

As India’s first publicly listed Real Estate Investment Trust (REIT), Embassy REIT has already made its mark, boasting a whopping 36.5 million square feet of completed office space spread across Bengaluru, Mumbai, Pune, and Delhi-NCR.

In a chat with PTI, Aravind Maiya, Chief Executive Officer of Embassy REIT, expressed his excitement about the company’s current trajectory, highlighting its robust growth. To meet the surging demand from global capability centers (GCCs) and local players alike, the company is hard at work constructing 6.1 million square feet of premium office space in Bengaluru. On top of that, Embassy REIT has inked a deal to acquire Embassy Splendid TechZone (ESTZ), a Grade-A business park, from its sponsor Embassy Group for a cool enterprise value of Rs 1,269 crore.

“We’re in the process of constructing 6.1 million square feet of Grade A office space, which will be completed over the next four years,” Maiya shared with PTI. He revealed that out of this total, 2.5 million square feet will be ready this fiscal year, followed by 2.2 million square feet in 2025-26, 0.4 million square feet in 2026-27, and the remaining 1 million square feet in the 2027-28 fiscal year. The tab for this construction is expected to tally up to around Rs 3,800 crore, primarily financed through debt.

Speaking about the acquisition of new assets in Chennai, Maiya noted that the deal is on track to be wrapped up by the end of the next month. ESTZ, the business park in question, boasts 1.4 million square feet of completed area, with an impressive 95% occupancy rate, housing bigwigs like Wells Fargo and BNY Mellon. It also features 1.6 million square feet of under-construction area and a promising 2 million square feet of future development potential.

To fuel this acquisition, trim its leverage, and fuel further growth, Embassy REIT is planning to raise up to Rs 2,500 crore. The operational portfolio could swell to 40.5 million square feet this fiscal year from the current 36.5 million square feet through a mix of organic growth and strategic acquisitions.

Looking back at the last fiscal year, Maiya remarked, “Overall, FY24 was really good for us. Growth in revenue and net operating income (NOI) was almost 8% year-on-year.” Occupancy levels stabilized at 85%, and the company notched up a record-high gross leasing figure of 8.1 million square feet.

With a positive outlook on the Indian office market, Maiya laid out the company’s guidance for 2024-25, including 5.4 million square feet of total leasing. The distribution to unitholders is expected to grow by 7% this fiscal year, with potential adjustments based on the completion of the acquisition by the end of the first quarter.

Embassy Office Parks REIT recently reported a 13% increase in its net operating income to Rs 765.6 crore and announced a distribution of Rs 494.8 crore to unit holders in the fourth quarter of the last fiscal year. Its net operating income stood at Rs 680.2 crore in the year-ago period. For the entire last fiscal year, Embassy REIT posted an 8% annual increase in its net operating income to Rs 2,981.9 crore, compared to Rs 2,766.3 crore in the preceding year.

The Board of Directors of Embassy Office Parks Management Services declared a distribution of Rs 495 crore or Rs 5.22 per unit for Q4 FY24, bringing the cumulative distribution for the entire 2023-24 to Rs 2,022 crore or Rs 21.33 per unit. Besides office spaces, Embassy REIT also operates four business hotels, with two under construction, and a 100 MW solar park supplying renewable energy to tenants.

Embassy REIT’s growth trajectory and strategic investments underscore its commitment to meeting the evolving needs of India’s office market while delivering value to its investors.

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