Embassy Office Parks REIT is evaluating a possible acquisition of 7.1 million sq ft of space across Chennai and Bengaluru. The REIT has signed non-binding offer letters with a 120-day exclusivity period.

Of the 7.1 million sq ft that is currently under discussion, 5 million sq ft is in Chennai and the remaining 2.1 million sq ft is in Bengaluru.

The REIT has also in the process of constructing another 7.1 million sq ft, within its existing campuses, at ₹3,200 crore, which is expected to be delivered over the next four-odd years.

Post delivery and stabilisation of these under-construction spaces, the incremental rental income to REIT is expected to be ₹800 crore.

According to Vikaash Khdloya, CEO, part of the Chennai and Bengaluru properties are already leased out, while some of it is under construction already. “The acquisition is subject to certain deliverables. So there is a 120-day exclusivity period and it can be expanded further,” he told businessline, without sharing the acquisition cost.

Other portfolio

Embassy REIT’s existing campuses are located in at Bengaluru, Delhi-NCR, Mumbai, and Pune. Nearly, 70 per cent of its portfolio is Bengaluru-centric.

In Q2 FY23 (quarter ending September 30), the REIT (real estate investment trust) had leased 1.6 million sq ft across 27 deals, including 0.6 million sq ft of new leasing and 0.5 million sq ft pre-commitment by ANZ at Embassy Manyata.

The REIT added 15 new high-growth occupiers, achieved 22 per cent positive leasing spreads on 1.6 million sq ft and 14 per cent rent escalations on 2.7 million sq ft. “We have achieved 70 per cent of the FY23 leasing guidance and post-December, we will take a re-look at the guidance numbers,” he said.

On the positive, the back-to-office trends are picking up, and there has been a 22 per cent increase (over the previous quarter) in attendance across the office spaces of the company.

There has also been an uptick in rent across key markets like Bengaluru, while a similar upward movement is being noticed in Mumbai, Delhi-NCR, Pune, Hyderabad, and Chennai.

Recession worries?

Asked if global recessionary apprehensions would lead to a slowdown in leasing activity, Khdloya said, deal cycles could be “a bit longer”. There could be “increased caution in case of large scale deals” of 1 million sq ft and more too.

“Despite recessionary concerns globally, the world’s best companies continue to partner with institutional landlords like Embassy REIT to capitalise on India’s structural advantages as a scalable and cost-efficient tech talent hub,” he said, adding that the REIT’s balance sheet has low leverage and debt at 7.1 per cent cost with the majority at fixed rates.