REIT ASIAPAC
COVER STORY
Cover Story
The 47.50 billion rupee ($690 million) initial public
offering by Embassy Office Parks REIT, India’s first real
estate investment trust, was approximately 2.6 times
oversubscribed on the last day of the offer on March 20,
2019. The REIT’s unit price has since risen over 10% from
its debut price of Rs 300 on the National Stock Exchange
and the Bombay Stock Exchange. A joint venture between
India’s Embassy Group and Blackstone Group, the REIT
owns offices and business parks that house multinational
tenants such as JP Morgan, IBM, Wells Fargo, and Google.
EMBASSY REIT, INDIA’S FIRST
REIT, SAYS IT HAS MULTIPLE
LEVERS OF GROWTH
Mike Holland,
REIT AsiaPac spoke to Mike Holland, CEO of the Manager for
Embassy Office Parks REIT, and asked him about the REIT’s
leverage strategy, dividend payouts, and potential growth.
CEO of the Manager to the
Embassy Office Parks REIT
Could you tell us a bit more about your
portfolio? What’s unique about it? What’s
the concept around it in terms of the
location, the quality, and the tenant mix?
existing corporate tenant base. More than 80% of our gross
rentals are from multinational companies, and we have seen
strong demand from those occupiers - more than 60% of our
leasing in the last 3-4 years totalling over 4 million sq. ft. has been
with our existing tenant base.
It is unique in that it is India’s first real estate investment trust.
The portfolio as of March 27, 2019 is at 33 million square feet (sq.
ft.), making it Asia’s largest office REIT. That 33-million-square-
feet portfolio is spread across four cities— Bangalore, Mumbai,
Pune, and NCR or the National Capital Region. Those four cities
account for 72.5% of total Grade A office stock in the country.
To give you some context in terms of the scale of the market:
over the last five years, those four markets absorbed about 136
million sq. ft., which is more new absorption than the combined
office space of the 11 global cities across the world.
The portfolio breaks into two broad categories: Firstly, our office
parks, which range from about 25 acres to 120 acres, where
typical leases can be well in excess of 100,000 sq. ft. and where
companies house hundreds, often thousands of employees in
large scale, park-like settings, usually with a strong focus on
export of services, often on a captive basis. Typical activities
include technology, financial services, research, consulting and
analytics, retail, healthcare, telecom, engineering, manufacturing
and so on. Our biggest office park has approximately 11 million
sq. ft. of completed offices.
More than 200,000 people work in our business parks. They
are employed by over 160 office tenants, and we have over 95%
committed occupancy as of December 31, 2018. Within the
33 million sq. ft., there are 25 million sq. ft. of offices, which is
completed and up and running, with the balance 8 million sq.
ft. of potential on-campus development. This reflects around
11% of the value of the portfolio; so, in accordance with the
Indian REIT regulations requiring at least 80% of the portfolio
to be completed and income producing, new build development
represents a small component of the overall portfolio.
The second category within the portfolio is a more city-centric
core type of office buildings, with smaller units for diplomatic,
legal, wealth, banking, and services sectors.
“Post-listing, our leverage is at sub-15%. It
was at 28% pre-listing and the majority of
the proceeds from the IPO would be used
to retire debt. We are comfortable to take
leverage levels up over a period of time in
order to take advantage of value accretive
acquisition opportunities.”
We see this on-campus development as being a lower risk type
of development in that land titles are clearly understood and
sanctioned, and construction delivery is more straightforward
than a green field development approach. Given that the new
buildings are on our existing campuses, we can leverage off our
Mumbai skyline
Mumbai cityscape
4
5