Embassy REIT to raise ₹2,500 cr, to buy 5 msf tech park in Chennai

April 6, 2024

Embassy Office Parks REIT plans to raise ₹2,500 crore via equity through an institutional placement. This money will partly fund its acquisition of an office park in Chennai for ₹1,269 crore.

The REIT has agreed to buy 5 million square feet of an office park, Embassy Splendid TechZone, in Chennai from its sponsor Embassy group. This acquisition will increase the REIT’s total portfolio by 11 per cent to 50.5 msf, making it one of the largest office REITs globally, a release said.

This also marks the REIT’s entry into the Chennai office market, which is seeing good traction.

The acquisition would directly impact its financials, leading to a 2.9 per cent accretion to the FY24 net operating income and distribution per unit. Around 1.4 msf of the asset is completed and 95 per cent of this is occupied and leased to clients such as Wells Fargo and BNY Mellon. The long-term earnings potential of the REIT would be boosted since 1.6 msf is under development, of which 26 per cent is pre-leased, and 2 msf is future development.

The remaining funds would be used to reduce its portfolio leverage to 27 per cent from 30 per cent now. This would provide flexibility for future growth, it said.

Embassy REIT would acquire an economic interest in 61 per cent of the lease revenues and 100 per cent of the asset’s management business. The acquisition value implies a NOI yield of 8.5 per cent for the completed portion and 10 per cent for the development portion, it said. The transaction is being done at a 6.7 per cent discount to the average of two independent valuations.

Earlier, the REIT acquired Embassy TechVillage and Embassy Business Hub in Bengaluru from its sponsor.

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