Embassy REIT’s Q3 profit down 15% at Rs 215 crore; firm announces investment of Rs 2,300 crore

Embassy Office Parks REIT, the country’s first listed REIT and the largest office REIT in Asia by area, on February 12 reported a 15 percent dip in consolidated net profit and announced an investment of Rs 2,300 crore to develop 5.7 mn sq ft of commercial space.

It reported a 15 per cent decline in consolidated net profit at Rs 214.79 crore for the third quarter ended December and also declared a distribution of Rs 431.29 crore to its unit holders for the quarter. It’s net profit fell to Rs 214.79 crore in the third quarter of this fiscal from Rs 253.45 crore in the year-ago period.

Total income has risen to Rs 595.94 crore from Rs 568.12 crore, according to a regulatory filing. The net operating income for the third quarter increased by 3 per cent year-on-year to Rs 478 crore.

“Even in the pandemic year we have signed 1 million sq ft leases on a year-to-date basis – 37 deals making up the million sq ft and we have delivered rent increases of 13 percent on a total of 5.3 million sq ft across 66 leases. That underscores the resilience of the business model of our REITs and the backdrop of all these issues gives us the confidence to embark on our new construction programme," said Michael Holland, Chief Executive Officer of Embassy REIT.

"We will be investing Rs 2,300 crore over the next three years to develop 5.7 mn sq ft of commercial space in different cities and different locations over the next four years. Of the 5.7 million sq ft, 1.1 mn sq ft is due for delivery this year and has already pre-leased to one of the leading global banks J P Morgan,” Holland told reporters.

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Embassy REIT Deputy CEO and COO Vikaash Khdloya said the company would also be looking at inorganic growth opportunities in cities like Bengaluru, Pune and Hyderabad.

“We are focused on acquisitions. It is our top priority but we don’t have any timeline driven targets for ourselves. We are only looking for opportunities in cities driven by technology and our preference would be Bengaluru, Pune and Hyderabad,” he said.

Holland said that as India's outlook steadily improves with a continued downward trend in active COVID-19 cases and the encouraging progress on vaccine roll-out, “we remain optimistic that Indian office leasing demand will continue to increase as occupiers accelerate their return-to-work programmes."

“Safety of employees working from our properties remains our highest priority. We have implemented international-standard safety procedures including enhanced sanitization and deep cleaning, fumigation and social distancing protocols. We have also initiated technology driven solutions such as optical thermal cameras, touchless visitor management, advanced air filtration and UV cleansing systems,” Khdloya told Moneycontrol.

“Also, we have received health, safety and ESG assurance certifications from globally renowned institutions, such as the British Safety Council and British Standards Institution, endorsing the quality and effectiveness of the wellness practices adopted by us and our efforts in controlling the spread of COVID-19 across our pan India office portfolio."

On December 24, 2020, Embassy REIT announced the successful completion of the Embassy TechVillage acquisition for Rs 97.8 billion ($1.3 billion) with a Rs 36.8 billion ($501 million) equity raise through an institutional placement. The current debt raise is part of the financing strategy for the above acquisition.

Embassy REIT is India’s first publicly listed Real Estate Investment Trust. Embassy REIT owns and operates a 42.4 million square feet (“msf”) 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. Embassy REIT’s portfolio comprises 32.3 msf completed operating area and is home to over 200 of the world’s leading companies.

REITs are listed entities that invest in income-generating properties and distribute at least 90 percent of their income proceeds to unitholders through dividends. After registration with SEBI, units of REITs will have to be mandatorily listed on exchanges and traded like securities.

SEBI notified REIT's regulations in 2014, allowing setting up and listing of such trusts, which are popular in some advanced markets.