Embassy Group-managed Embassy Office Parks REIT is considering the sale of its Embassy Quadron office campus in Pune's tech-heavy Hinjawadi suburb, according to people familiar with the matter. One of Embassy REIT's three office assets in Pune, Embassy Quadron, has markedly lower occupancy, at 54%, compared to the other two assets, which is thought to be one of the reasons why the REIT may choose to move the asset along.
"It is a strategic move to churn up the REIT portfolio. The other two properties in Pune Embassy Tech Zone and Embassy Qubix doing extremely well in terms of occupancy. And the building is also in a great condition," said one of the people mentioned above.
Queries sent to Embassy REIT did not elicit any response.
According to one of the people, Bengaluru-based Embassy REIT, which was India's first listed REIT and was backed by Blackstone, is expecting to fetch more than Rs 1,200 crore for the asset, with a leasable area of 1.9 million sq ft, spread across four towers on a 25.5 acre land parcel at Phase-II of Hinjawadi's Rajiv Gandhi Infotech Park. On its website, Embassy REIT said that Embassy Quadron's market value is at around Rs 1,140 crore, with the campus having seven occupants.
Marketing for the transaction is starting as early as this month, according to one of the people, but the deal is expected to close next year. Developers in Pune, as well as sovereign wealth funds, are likely to evince interest in the asset.
Embassy REITs planned sale of the Quadron comes at a time when it has a number of projects lined up for acquisition, especially from its managers Embassy Group, and has been aggressively fundraising for the same, through debt and other measures.
After declaring its Jan-Mar and FY24 results, the REIT's managers said that it has new developments of 6.1 million sq ft to come into its portfolio over the next four years. It also signed a deal to take over the Embassy Splendid Techzone in Chennai from Embassy Group for Rs 1,185 crore, the acquisition being completed early-June.
Despite the REIT reporting total leasing of 8.1 million sq ft of space in FY24, it lowered its leasing guidance for FY25 to 5.4 million sq ft, while upping its distribution target to Rs 22.40-Rs23.10 per unit, up from Rs 21.33 per unit in FY24.
Embassy Quadron commands a rent of Rs 55-60 per sq ft per month, as per people close to the deal. According to local market sources, the rent is close to the standard for Grade-A office spaces in the area. The campus started operations in 2008. At Quadron, 62 percent of the occupiers are in the technology space, with the next largest clients being research, consulting, and analytics firms.
Embassy Tech Zone is the largest of Embassy REIT's three assets in Pune, and has a current occupancy of 78 percent. It has a leasable area of 5.5 million sq ft, of which 3 million sq ft has been completed.
Besides large technology clients, Embassy Tech Zone also has a sizeable presence of engineering and manufacturing clients, hosting their global capability centres and research and development facilities. Qubix is has an occupancy of 68 percent, although its leasable area is lower than Quadron, at 1.5 million sq ft.
At 0956 IST, units of Embassy Office Parks REIT traded 0.8% lower on the National Stock Exchange at Rs 361.60.
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