Embassy REIT : Overview, progress report, investment potential
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Embassy REIT : Overview, progress report, investment potential

By Vishul Sapra

Last updated - Sep 23rd, 2022

Table of content
  • A. How did Embassy Group settle Embassy REIT in India?
  • B. Embassy’s progress analysis
  • Embassy's REIT dividend history
  • Embassy’s extensive office assets
  • What’s the scope to invest in Embassy REITs?

Embassy REIT is the first REIT to settle in India in 2017. Being listed on the IPO for over 3 years, Embassy REIT’s growth is quite high when compared to the industry average growth of 7.8% in the same period. Furthermore, in this quarter ended on June 22, the company has reported a 12% jump, y-o-y in revenue operations to Rs.829 cr.

Embassy REIT has remained immune even in the second covid wave, maintaining a 90% occupancy rate throughout the year. In the face of such large dividends and interest distributions, would you consider having Embassy REIT in your portfolio? Let’s find out!

A. How did Embassy Group settle Embassy REIT in India?

Embassy Group is a leading real estate development firm, which started its operations in the year 1993. Led by Jitu Virwani, Chairman and managing director of the group, the firm has developed an array of spaces in the commercial, residential, warehouse, hospitality, retail, and industrial sectors. The company’s operations are spread across Indian and International markets that include Bangalore, Chennai, Pune, Coimbatore, Serbia, and Malaysia.

This is how Embassy REIT was settled in India-

  • The Embassy REIT was settled by the Embassy sponsor on - March 30, 2017, for an initial sum of Rs. 5,00,000 in Bangalore, Karnataka.

  • The Embassy REIT was registered with SEBI on- August 3, 2017, as a real estate investment trust under REIT Regulations, drafted by SEBI.

  • SEBI took on record the addition of the Blackstone Sponsor to the sponsors of the Embassy REIT on - August 21, 2018,

  • The Embassy Sponsor and the Blackstone Sponsor are the sponsors of the Embassy REIT. Embassy REIT EOPMSPL(Embassy Office Parks Management Services Private Limited) has been appointed as the Manager to the Embassy REIT.

    The Embassy office park was listed on REIT IPO on - March 20, 2019,

B. Embassy’s progress analysis-

Embassy Office Parks REIT, which is known as the most prominent office REIT in Asia by area, has successfully completed 3 years of listing, with strong business performance. The REIT has delivered over Rs 5,800 crores distributions to its expanding unitholder base.

According to Jitu Virwani,

“Despite the unpredicted global pandemic and the sliding economy, Embassy REIT has consistently delivered over the past 3 years. The REIT has always aimed to give higher long-term returns to its unitholders. The REIT also is focusing to deliver growth as the corporates implement back-to-office programs and office leasing gains momentum.”

Last 3 years update-

In the 3 year period, the firm has -

  • Leased 6.4 msf across 135 deals

  • Increased its occupier base to over 200 blue-chip corporations

  • Delivered 2.5 Msf of new space, including 1.1 MSF of J.P. Morgan campus

  • Begun 4.6 Msf of new development.

Update on FY2021-FY2022

  • Embassy REIT has also acquired and integrated a 9.2 msf marquee asset, Embassy TechVillage, in India’s best micro-market in Bangalore.

  • The company reported its net operating income up by 58% to Rs. 2,491 crores in FY2022 as compared to FY2019.

  • Its operating margin stood at 84% and has distributed over 5,800 crores to unitholders. With 15% annualised total returns and grew Unitholders base by 10 times to over 40,000 in the last three years.

Embassy’s June 2022 progress update-

In contrast to the 5 million square feet leasing guidance for FY23, the Q1(April-June), leasing was 1.8 million sq.ft across 25 deals-one of the highest in a single quarter for the Embassy group in the past 7 years!

  • The leasing for Q1 includes new leasing of 415,000 sq ft at 31% re-leasing spreads and above market rents, end-of tenure renewals of 80,000 sq ft, mainly by IT occupiers at Pune and Noida, and 550,000 sqft pre-commitment.

  • Embassy REIT ended the quarter with a stable occupancy of 87% and 1 msf of the new deal pipeline.

Embassy's REIT dividend history

Embassy_Dividend.jpg

Embassy’s extensive office assets-

As mentioned earlier, the Embassy office park REITs has its assets in India’s top cities which include Delhi NCR, Pune, Bangalore, and Mumbai.

Embassy.png

1) BANGALURU-

  • Embassy Manyata Business Park-

A variety of facilities and amenities are available at Embassy Manyata Business Park, including intra-city transportation, outdoor sports zones, rooftop football arenas, a food court with over 1,000 seats, and an amphitheater with 600 seats. The park has a completed area of 11.8 msf and offers an integrated “business ecosystem” to its occupiers. It houses 68 tenants with more than 100,000 park users.

Site areaLeasable areaOccupancy rateNo. of tenants
121.76 acres14. 8 msf87.0%44
  • Embassy Golf Links business park-

Embassy Golf Link business park is one of the awarded and recognized places in India. It is strategically located in the hotspot of Bengaluru city. The park adjoins the picturesque KGA Golf course offering panoramic views of the greens. Golflink offers an integrated office ecosystem, with 4.5 msf of completed area.

Site areaLeasable areaOccupancy rateNo. of tenants
65 acres3.1 msf99%25
  • Hilton hotel at Embassy Golf Links-

Hilton hotel by Embassy is located in the Golf links business park. As this is too, situated in the heart of Bengaluru, the hotel connects to the KGA Golf course offering great views of the greens. Its proximity to airport and Indiranagar recreation hub makes it a center of customer attraction.

Site areaMarket valueCategoryNo. of keys
3.59 acresRs. 3965 mn5 star247
  • Embassy Tech Village

One of Bengaluru's largest office parks is Embassy Tech Village. Located in North Bengaluru, a prominent growth corridor that connects the airport with the city center, it is easily accessible from the airport. It offers its tenants an integrated "business ecosystem" with a completed area of 11.8 msf. With more than 100,000 park users, it houses 68 tenants.

Site areaLeasable areaOccupancy rateNo. of tenants
85.5 acres9.2 msf99.0%45
  • Embassy One

Located between the central business district and airport, Embassy One is strategically located on Bellary Road entering Bengaluru CBD from the international airport. The development includes a luxury Four Seasons Hotel, service residences, elite shopping centers and boutique office space with fast connectivity to the airport. As part of the Embassy One mixed-use development, which includes a luxury hotel and retail space, Embassy One offers small-format office space to corporate occupiers.

Site areaLeasable areaOccupancy rateNo. of tenants
3.19 acres0.3 msf33%4
  • Four Seasons

Located at a distance of 6km from Embassy Manyata, Four Seasons is the only luxury hotel located in the airport corridor. Between Kempegowda International Airport and the Central Business District (CBD), it is strategically located on a major arterial road. As a landmark destination, Embassy One will raise the bar for living, leisure, and work. There are lush green spaces surrounding the building, as well as military grounds adjacent to it.

Market valueCategoryKeys
7,266 mn5 star230
  • Embassy Energy

The Embassy Group's commitment to green and sustainable energy is exemplified by Embassy Energy Private Limited (EEPL), which owns and operates a 100 MW solar power plant in the Bellary district of Karnataka. The Embassy Manyata Business Park, the Embassy Golf Links, and the Embassy Tech Village are all supplied with electricity by Embassy Energy.

Site areaCapacityMarket valueAnnual market value
460 acres100 mw9,144 mn215 mn

2) MUMBAI

  • Express towers

Mumbai's Express Towers is a landmark Grade A office building owned by institutional investors. In addition to this, it is close to some of the most affluent neighborhoods of India. The 1970-built Express Towers offer panoramic views of Marine Drive, the Arabian Sea, the coastal road, and South Mumbai. There is excellent public transportation and Mumbai Metro access to the LEED Silver certified property.

Site areaLeaseable areaOccupancy rateNo. of tenants
1.46 acres0.5 msf78%26
  • The first international finance center

Located in the Bandra Kurla Complex, the FIFC is the grade- A city center office building in Mumbai. BKC is an area known for financial hubs due to its proximity to the city airports and rail networks. The office space houses some of the greatest financial tenants and commands the highest rents. It is also well-connected to the residential hubs.

Site areaLeasable areaOccupancy rateNo. of tenants
1.99 acres0.4 msf86%8
  • Embassy 247

Embassy 247 is located at the prime location with fine infrastructure. Its proximity to the residential areas makes it a favoured location for corporate occupiers. This is a key factor considering the ease of commute for employees. Embassy 247 is a three-tower development consisting of commercial and retail space in the heart of Vikhroli. All other developments in this area are dwarfed by this 69-metre tall structure. It alsThe building is equipped with world-class amenities along with an LEED certification. It houses a business centre, ATMs, banks, a gymnasium, food courts, and high-end restaurants.

Site areaLeasable areaOccupancy rateNo. of tenants
7.27 acres1.25 msf84%23

3) PUNE

  • Embassy Quadron

Embassy Quadron is a Grade-A infotech park located in Hinjewadi, in Pune. It is one of the most popular office locations in Pune with a large hub of technology companies. The park is well connected to the transportation links between Mumbai and central Pune. It has an excellent social infratsruture with proximity to the housing sector around. The tech space also has an excellent workforce with many amenities such as restaurants, ATMs, medical facilities, etc.

Site areaLeasable areaOccupancy rateNo.of tenants
25.52 acres1.9 msf50%7 tenants
  • Embassy Qubix

Embassy Qubix is a Grade A office park located close to the Mumbai-Pune Expressway in Pune offering tremendous social and lifestyle infrastructure. Embassy Qubix is located in the submarket of West Pune, which offers excellent social and lifestyle infrastructure, various transportation links to both Mumbai and Pune Central Business District (CBD), and a large residential catchment that caters to the growing technology workforce.

Site areaLeasable areaOccupancy rateNo. of tenants
25.16 acres1.5 msf90%22
  • Embassy TechZone

Located near the Mumbai-Pune Expressway, Embassy TechZone is a premium business park in its submarket, and is spread across a total area of 67.45 acres. With six operational towers and a further 3.3 msf of proposed development area, this park provides a good social infrastructure.

Site areaLeasable areaOccupancy rateNo. of tenants
67.45 acres5.5 msf84%18

4) Delhi NCR

  • Embassy galaxy

Embassy Galaxy is a 1.4 msf Grade A office park located in Noida, that is designed based on an open campus-style park. The property is part of an integrated ecosystem that includes a residential area, and universities located side-by-side that follow a walk-to-work culture. Its submarket has several multinational corporate occupiers, prominent universities, and co-located residential areas with well-planned infrastructure and excellent connectivity.

Site areaLeasable areaOccupancy rateNo. of tenants
9.88 acres1.4 msf89%12 teants
  • Embassy Oxygen

Embassy Oxygen is a Grade A office park in Noida, located in close proximity to the Noida-Greater Noida Expressway. The property is among the largest office parks in the city and one of only two SEZ park in its submarket with excellent infrastructure, easy access to talented individuals and brilliant connectivity.

Site areaLeasable areaOccupancy rateNo. of tenants
24.83 acres3.3 msf73.8%7

What’s the scope to invest in Embassy REITs?

Embassy REIT has the highest dividend yield & highest occupancy rate. The company owns & operates 42.8 MSF (million square feet). It has a portfolio of-

  • 8 office parks
  • 6 hotels (two are under construction)
  • a 100 MW solar power plant. It comprises 33.8 MSF completed operating area with an occupancy of 87% as of March 31, 2022.

The growth prospects of REIT depend on the visibility to acquire new assets from the sponsor. According to this, Embassy REIT has-

Leasable area ofCompleted area ofUnderconstruction area ofProposed development of
42.8 msf33.8 msf4.6 msf4.4 msf

Besides, Embassy REITs have a sector level diversification too! Despite its dominance over the IT sector it is spread across residential, commercial, hospitality, warehouses, and industrial sectors. This results in fewer loss risks in case of unpredictable economic setbacks. In contrast to other REITs, Embassy has a significant hotel exposure (4% of their GAV). The business travel segment of their operations will continue to drag if work-related travel remains muted. In FY22, the company escalated rents by 14% to 7.7 Msf across 89 leases. A 10-15% increase in NOI will result from this.

Embassy REITs have done pretty well since its listing. If you are a savvy investor, looking out to invest in REITs to diversify your portfolio, we have numerous real estate investment opportunities on our platform, including REITs. Let’s get your portfolio diversified, head to our REITs page now!

Author avatar
Vishul SapraInvestment Associate

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