Embassy REIT to invest Rs 2,200 crore in next 4 years to develop new office buildings

Embassy Office Parks REIT is India's first Real Estate Investment Trust (REIT) sponsored by global investment firm Blackstone and Bengaluru-based realty firm Embassy group. It has a completed portfolio of about 34 million square feet of office space across Bengaluru, Mumbai, Pune and Noida.

REIT, a popular instrument globally, was introduced in India a few years ago to attract investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enable retail participation.

On operational performance so far this fiscal year, Khdloya highlighted that the company has leased 3.4 million square feet of office space during April-September and already achieved 70 per cent of the full-year leasing target of 5 million square feet. The leasing, both fresh and renewals, has been done at a higher monthly rentals.

''The office demand continues to remain very strong in India because fundamentally India has a huge structural advantage both in terms of talent pool available and low costs,'' he noted.

Office rent in India continues to be very low at USD 1-2 per square feet a month compared with global standards.

''With recessionary fears, what we believe will happen is that as companies look to optimise costs and efficiency, it will mean more demand to India. More off-shoring of work to India which will again create demand for real estate space,'' Khdloya said.

To hire quality talent and then retain them, he said the corporates have been looking at the health and wellness standard in premium office parks.

Bullish on demand for premium workspace going forward, Khdloya said the company has started construction work of fresh 2.5 million square feet area during the July-September quarter.

The company is developing a total of 7.1 million square feet of office space currently, including the new 2.5 million square feet, and these will get completed over the next 3-4 years.

''We have committed a capex of Rs 3,200 crore to develop the 7.1 million square feet area. Out of this, Rs 1,000 crore has already been spent and the balance Rs 2,200 crore will be invested over the next 3-4 years,'' he added.

That apart, Embassy REIT is also looking for inorganic growth and is negotiating with one of its sponsors Embassy Group to buy assets in Chennai and Bengaluru.

The company has signed non-binding offer letters for the potential acquisition of two high-quality office properties in Bengaluru and Chennai from Embassy sponsor and its affiliates. These two assets have a total leasable area of 7.1 million square feet, of which 3.7 million square feet is completed or nearing completion.

''We intend to close the deal in the next 120 days,'' Khdloya said, adding that the company would fund this transaction, if fructified, with equity and debt.

Last week, Embassy Office Parks REIT reported a 13 per cent increase in net operating income to Rs 703.8 crore for the quarter ended September, as against Rs 623.6 crore in the year-ago period.

Embassy REIT owns and operates a 43.2 million square feet portfolio of eight office parks and four city-centre office buildings in Bengaluru, Mumbai, Pune, and Delhi-NCR.

Its portfolio comprises 33.4 million square feet completed operating area and is home to over 200 of the world's leading companies. Around 87 per cent of its portfolio is leased to corporate clients.

Embassy REIT owns four operational business hotels and is developing two more hotels. It also has a 100 MW solar park that supplies renewable energy to tenants.