Embassy REIT drops plan to sell Quadron in Pune, says open to 'accretive' acquisitions

Embassy REIT CEO Amit Shetty said that the REIT is open to acquisitions outside the sponsor group.

Embassy Office Parks REIT has scrapped the proposed sale of its Quadron office development in Pune's Hinjawadi, CEO Amit Shetty confirmed the decision in an interaction with Moneycontrol.

The Embassy Group-sponsored REIT had been exploring the sale of the property — one of its three major developments in Pune — since last year as part of a strategy to churn its portfolio.

Shetty, however, said the REIT is banking on new infrastructure development in the Hinjawadi area, which accounts for more than half of the IT exports from Pune, Maharashtra's largest technology hub.

The infrastructure development, crucial to ease long-term traffic issues in the area, includes a new connection to the Pune Metro and a link to the arterial Mumbai-Pune Expressway, facilitating a faster connection to the new Navi Mumbai International Airport.

"From a micro market perspective, we believe with all this infrastructure, given the occupier base, it's only one way up for us now and that is upwards. We are a large and long-term asset holder,” Shetty said.

“If we are a little patient, the markets will change and it will see a good revival of some of these assets that we have there. We have evaluated the opportunity and I think we want to stay put."

Moneycontrol reported last year that Embassy REIT had put up the Quadron for sale, valuing the property at around Rs 1,200 crore. Poor occupancy was thought to be one of the reasons for the sale, especially after the exit of one of its marquee occupiers, Cognizant.

Currently, Quadron has an occupancy of 21 percent, the lowest across the REIT’s completed portfolio of around 41 million square feet (msf).

While the REIT, the first one launched in India, has a significant pipeline of assets from its sponsors- at around 7.2 msf- Shetty said it also remains open to external acquisitions.

Shetty listed inorganic acquisitions as one of the REIT's five levers for growth. The others are fresh leases, rental escalations, re-leasing spreads and organic additions.

"We are in a very good space, given that we got the growth trajectory for the next couple of years already chalked out. Having said that, inorganic growth is important, but at the same time, it needs to be done in a very accretive manner. In the near future, we will come back to the market and announce some third-party acquisitions as well," Shetty said.

Resurgence in IT/ITeS

While most of the commercial office space REITs have seen their exposure to IT services reduce amid concerns about the sector, including the threat from AI and resultant layoffs by companies such as Tata Consultancy Services, Shetty said the share of tech services as part of its leasing pie has grown year-on-year.

"IT, ITES is being muted for a little bit. Having said that, we are seeing active hiring from almost all the ITES companies, probably except for TCS for the moment. But TCS has also done some very large real estate trades in the recent past.

“For us in our portfolio, we are seeing a little bit of a surge in our ITeS clients. We had about 8 percent exposure a year ago. Now that it has moved by about 300 basis points to about 11 percent exposure on ITeS," Shetty said.

He said global capability centres (GCCs), however, would be the main growth driver of the REIT ecosystem. Nearly two-thirds of the new GCCs are expected to be based in Bengaluru, which is also Embassy REIT's largest market.

Shetty noted that India's appeal extends beyond the top tier of global firms. The "middle stack" of companies is also increasingly headed to the country to leverage its technology and AI talent.

Q2 performance

For the September quarter, Embassy REIT declared a total distribution of Rs 617 crore, its highest for a single quarter. It signals high levels of rental growth and re-leasing spreads.

On a per-unit basis, it distributed Rs 23.01 to its unitholders, with cumulative distribution reaching Rs 2,181 crore.

Shetty added that the REIT has guided for a growth of around 10 percent for FY26. This growth is projected to reach approximately Rs 25 per unit at the midpoint of the guidance.