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While the real estate sector in the country is embroiled in liquidity crunch caused by NBFC crisis, the country’s first real estate investment trust (REIT), Embassy REIT, feels it is actually a boon for them.
“While there is a lot of a headwind in the market, it is also an opportunity because the industry is in a shake-out mode — especially the residential developers. This allows us to be competitive in the market when it comes to acquiring new assets from hybrid developers who want to sell their commercial assets because they are over-leveraged in residential space. We find ourselves in a sweet spot because the industry has consolidated itself into very few developers who can actually have access to capital and we believe we are one of those few players,” Embassy REIT Chief Executive Officer Mike Holland told BusinessLine.
Eyeing stressed assets
Holland said the company is actively looking at acquiring new assets and the liquidity crisis gives Embassy Office Parks REIT an opportunity to buy stressed assets that should come at a bargain.
“We are in discussions with more than a dozen stressed assets for potential acquisition. In the first round itself, 85 per cent of them don’t make the cut. We are looking for assets with no litigations against them,” Holland said.
To reach its limit for raising debt, Holland said the company had a headroom of over ₹14,000 crore, which can theoretically be used to acquire assets. However, he said the company will be looking at a debt and equity mix, giving the company even higher capital for acquisitions.
Holland also pointed out at the shortage of commercial realty space in the country, which is helping the group to grow rapidly while the residential real estate market is going through its worst slump ever.
“Over 80 per cent of our tenants are global MNCs, each of whom are rapidly expanding in India. Each of them we’ve met recently consistently spoke about expanding their employee base in India. In fact, we also spoke to some MNCs who are now looking at entering India for the first time. As the world becomes technologically complex, what puts India ahead is the availability of technology talent,” Holland said.
Q1 net jumps
On Monday, Embassy Office Parks announced its quarterly results first time after listing on the Indian bourses.
Revenue from operations for the quarter increased by 19 per cent to ₹535 crore against ₹449 crore logged during the previous fiscal, driven by continued leasing momentum across the portfolio.
New leasing during the quarter was 0.6 million square feet (msf) with 50.6 per cent re-leasing spreads, while occupancy as on June 30, 2019 stood at 94.3 per cent on the 24.8 msf completed office portfolio.
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