Embassy REIT, the largest real estate investment trust in Asia, will look at inorganic growth options, as it re-explores acquisition opportunities in Chennai. Further, fund-raising plans are also under discussion now.
According to Aravind Maiya, Chief Executive Officer, Embassy REIT, there has been an improvement in market conditions that include improvement in rentals across existing buildings, higher occupancies in existing ones and better performance across hotels. All this, have led to a correction in stock prices, reflecting increased investor interest.
Occupancies are at 90 per cent across key properties including Bengaluru and Mumbai. Hotels had a 55 per cent occupancy and a 19 per cent ADR (average daily rate) growth, resulting in an EBITDA of ₹50 crore.
“As stock prices correct, we can now look at raising funds to support our inorganic growth plans. For instance, we had stalled discussions on the acquisition opportunities in Chennai. That is one market we are keen on. And now, we would look to re-explore the options,” he told businessline.
Stock prices moved up from ₹315-320 a piece to around ₹370 over the last six months, as leasing activities picked up and also post an amendment in SEZ rules by the Centre.
Relaxation in SEZ rules
Embassy REIT, intends to de-notify 1.1 million square feet (msf) (0.8 msf in Bengaluru and 0.3 msf in Pune), following change in rules.
“We have also applied for demarcation of an additional 1.1 msf area across our Bangalore, Pune and Noida properties, as part of our Phase 1 demarcation plan under the amended SEZ rules. Of the balance 2.3 msf SEZ vacancy, 1.4 msf is in Embassy Quadron in Pune and Embassy Oxygen in Noida. We will look to apply for demarcation of these areas based on an up pick in leasing activity in these respective micro-markets,”Maiya said.
According to him, despite the global economic scenario and a cyclical slowdown in demand for IT services, India’s office sector showed resilience.
The gross absorption grew by 11 per cent y-o-y to 59 msf in 2023 (calendar year), with absorption exceeding supply additions.
“With balanced demand-supply dynamics in our key markets, range-bound vacancies and marginal rent growth was witnessed,” he said. Embassy REIT secured 14 per cent escalations on 1.3 msf and 29 per cent spread on 0.2 msf on renewals in Q3FY24.
Leasing and Financials
The REIT achieved a full year leasing guidance of 6.5 million sq ft in nine months, with 3.5 msf being leased in Q3FY24.
Recoveries are being witnessed in markets like Noida and Pune.
A development pipeline of 6.9 msf, of which 90 per cent is in Bengaluru is its largest market.
The leasing of 3.5 msf included 22 deals, including 1.1 msf of new leases and three large pre-lease deals of 2.2 msf in Bengaluru with leading multinationals. The leasing was driven by global captive centres (GCCs) – accounting for 78 per cent of the total – across sectors like BFSI, retail and tech.
In the Oct – Dec period, Embassy REIT witnessed an 8 per cent y-o-y increase in revenue from operations to ₹936 crore. The earnings before interest, tax, depreciation and amortisation increased by 9 per cent to ₹760 crore for the period.