Embassy Office Parks REIT expects 54% growth in net operating income

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Updated: April 2, 2019 7:06:12 AM

Meanwhile, highlighting the attractiveness of REIT for domestic investors, Vikram Garg, managing director, Blackstone Advisors India, said that the development part of Embassy REIT’s business is highly ring-fenced unlike infrastructure.

Apart from this REIT will also look at external acquisition opportunities.

The Embassy Office Parks REIT expects a 54% growth in its net operating income (NOI) in the next three years – till financial year 2020-2021.

Speaking to media at an event post- REIT listing in Mumbai, Michael Holland, CEO, Embassy Office Parks, said that of the portfolio on offer in the REIT about 2.7 million square feet is under construction, and most of it will be completed in the next two and a half years.

“All of this construction is within the Parks and is in addition to the about 25 million square feet (sq ft) that is operational,” he said, adding that it gives good headroom for the growth in REIT’s NOI.
As of March 31, 2018, around 81.4% of the gross rentals from their 160 tenant base is contracted with multinational corporations and around 43.8%is contracted with Fortune 500 companies such as JPMorgan, Google and Microsoft.

In September last year, Embassy Office Parks had filed the DRHP with markets regulator Sebi to launch REIT, which is said to be Asia’s largest in terms of portfolio size of 33 million sqft. The area comprises seven business parks and four city-centric buildings spread across Mumbai, Bengaluru, Pune, and Noida.

In terms of the supply addition, Holland said that there is 7.9 million sqft, which will get added organically taking the portfolio from 25 million sq ft to 33 million sq ft. Apart from this REIT will also look at external acquisition opportunities.

He said external acquisitions could either come as part of Right of First Offer (ROFO), wherein Embassy offers some properties to REIT and it chooses to decide whether or not to acquire those properties.
“There is about 40 million sq ft of that. In addition we have the option to go out to third party assets and if they fit in our overall theme, which is the large scale office/business park kind of properties and high quality building dominating its sub markets, we may choose to acquire them”, Holland said.

According to media reports, the trust is also keen on expansion in due course and at right prices in Chennai and Hyderabad. In Chennai, it has a ROFO asset, which is currently under construction. It is a 5 million sq ft asset, but only 0.9 million sq ft has been completed.

Ahead of the opening of the issue, the REIT had raised `1,743 crore from anchor investors, including a host of foreign investors such as Fidelity, Schroders, TT Avica, Prusik and others. Kotak Mahindra Life Insurance was one of the domestic investors alongside trusts linked to Radhakishan Damani and Gopikishan Damani.

Meanwhile, highlighting the attractiveness of REIT for domestic investors, Vikram Garg, managing director, Blackstone Advisors India, said that the development part of Embassy REIT’s business is highly ring-fenced unlike infrastructure. “In terms of real estate, it is a perpetual life asset. Declining NAV profile should not happen. Yes, there will be volatility in stock trading, but given the predictability in the cash flows and we continuing to deliver on numbers, we will hopefully see NAV growing”.

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