Embassy Office Parks, Asia's largest Real Estate Investment Trust (Reit) in terms of portfolio size of 33 million square feet and India's maiden instrument, plans to raise Rs 4,000 crore through non-convertible bonds to meet development needs of the assets it holds.

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Embassy Office Parks is a joint venture between global investment company Blackstone and Bengaluru-based Embassy Group.

On Wednesday, they announced details of the Reit to raise Rs 4,750 crore, comprising of 12,95,56,000 units with a price band of Rs 299-300 per unit between March 18 and March 20. The Reit has already received Rs 876 crore commitment from four strategic investors – American Funds Insurance Series, New World Fund INC and SMALLCAP World Fund Inc.

Vikaash Khdloya, deputy chief executive officer and chief operating officer, Embassy Office Parks did not specify when the non-convertible bonds will be launched but he said that it will happen after the Reit issue.

"We plan to raise Rs 4,000 crore through debt financing, which would be used for repayment of debt as well as for construction financing and working capital requirements at asset special purpose vehicles," said Khdloya.

Michael Holland, chief executive officer, Embassy Office Parks said that at present the company has eight million square feet available for development while 2.6 million square feet is under construction. Eight million square feet may come up in the next five years.

At the moment, out of the 33 million square feet with Embassy, around 24 million square feet is operational with 95% occupancy, yielding an annual rental income of over Rs 2,000 crore.

Going further, Holland said the company will look at expanding the Reit portfolio.

"We are not looking at acquisition today. We are very focused on making sure our base business is in the best way possible," Holland said.

"We are considering Embassy Group assets that are under development for acquisition. But there is no obligation to buy from the sponsor. We may also go out in the market and buy projects. Such acquisitions can happen either by increasing debt or swap for units in trust," he said.

In India, there's about 500 million square feet of Grade A office spaces available.

As per the plan, the proceeds of the Reit issue will be utilised for partly repaying the debt, acquiring one of the assets from Embassy One and for general corporate purposes. The current debt is over Rs 8,400 crore, and Rs 3,700 crore will be repaid from the proceeds, while about Rs 460 crore will be utilised for acquisition.

The draft Red herring prospectus for the Reit filed with Securities and Exchange Board of India states that "portfolio revenue from operations is projected to grow by 55.80% over the projections period," which is the next three years, due to expectation of higher rentals.

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  • Rs 4,750 crore – Embassy Reit plans to raise next week  
  • 33 million square feet – Portfolio size of the real estate investment trust