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Embassy REIT Q2 net operating income up 30% at Rs 624 cr; distributes Rs 537 cr to unit holders

Office space leased by the company stands at about 7 lakh sq ft during the second quarter, including renewals and new leases. Its new lease pipeline stands at 5 lakh sq ft

Embassy Office Parks REIT, India's first Real Estate Investment Trust (REIT), on October 29 reported a 30 per cent year-on-year growth in net operating income at Rs 624 crore for the quarter ended September. It also reported significant uptick in deal activity with 713K sq ft of total lease-up, delivering at 20% leasing spread.

The company is hopeful of a strong demand revival by early to mid-2022, with Bengaluru expected to lead India’s office recovery story.

In a regulatory filing, the company said that it will distribute Rs 537 crore to the unit holders.

The distribution comprises Rs 108.06 crore in the form of interest, less applicable taxes, if any, Rs 240.76 crore in the form of dividend and Rs 187.68 crore in the form of proceeds of amortization of SPV (Special Purpose Vehicle) level debt. The record date for the Q2 FY2022 distribution is November 10, 2021, and it will be paid on or before November 13, 2021.

The company said that Embassy REIT gave on lease 7.13 lakh square feet of office space during the second quarter of the current financial year.

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"We delivered our strongest leasing activity since the start of the pandemic. We successfully completed a significant Rs 4,600 crores debt raise at an impressive 6.5 per cent interest rate and we received global recognition for our continuing commitment to sustainability,” said Michael Holland, Chief Executive Officer of Embassy REIT.

The company also achieved a stable portfolio occupancy of 89 per cent, with a 15 per cent rent increase on 1.4 million square feet across 22 leases.

Embassy REIT said construction is in full swing on 5.7 million ssq ft projects, with 1.1 million sq ft JP Morgan campus on track for handover by year-end. On operations highlights, the company said it has collected over 99 per cent of office rents on 32.3 million square feet operating portfolio.

Speaking to Moneycontrol, Vikaash Khdloya, deputy CEO and COO, Embassy REIT, said that the company is witnessing “early but clear signs of revival.  We leased about 7 lakh sq ft of space during the second quarter that includes renewals as well as new leases. Our pipeline is the healthiest in the last seven-eight quarters. We have disclosed a new lease pipeline of 5 lakh sq ft.”

Khdloya told Moneycontrol that revival in office space leasing is on account of pent up demand and due to occupiers now starting to take decisions.

“We have seen a 65% increase in inquiries and site visit in one quarter. Momentum is picking up. Digital and technology spends have increased globally, which means more offshoring to India," Khdloya said. "Hiring by IT companies has increased and they are planning to get their employees back to work. Global captive insurance companies and health firms are now offshoring more work to their captive centres in India."

The executive thinks the second wave was a hiccup and is behind us. Embassy is positive on the strong demand revival in early to mid-2022, he added.

He said that the total active leasing requirements across the country stand at 26 mn sq ft.

“Out of the 26 mn sq ft, about 56% is in Bengaluru. This is active RFP, how far they close we don’t know. Bengaluru is expected to lead India’s office recovery. We are 75% of value in Bengaluru. The second quarter has been resilient and strong and our revenues have grown, largely contributed by the TechVillage acquisition. But we think both leasing momentum has picked up and we have leased 7 lakh sq ft and healthy 20% overall spread. Our pipeline looks encouraging at 5 lakh sq ft. and hopefully we should be able to convert it by Q3.”

The company’s future pipeline consists of spaces in and around Bengaluru. “Right now we have 57 lakh sq ft space under construction of which about 70% is in Bengaluru (the highest proportion of active RFP). The balance 30% is in Noida and Pune,” he said.

Embassy REIT, sponsored by Embassy group and Blackstone, is India's first publicly listed REIT. It owns and operates a 42.4 million square feet portfolio of eight infrastructure-like office parks and four city-centre office buildings in India's best-performing office markets of Bengaluru, Mumbai, Pune, and the National Capital Region (NCR).



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Vandana Ramnani
first published: Oct 29, 2021 07:15 pm
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