Article

Embassy Office Parks REIT- Information Note

07 Aug 2019

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens- March 18, 2019
Issue Closes- March 20, 2019
Price Band- Rs299- 300
Issue Size- 15.8cr units
Allocation to Strategic Investors~2.9cr units
Net Issue Size-~12.9cr units
Issue Size#- ~Rs4,750 cr
Post Issue MCap#- Rs23,046cr
Bid Lot- 800 units

 Note: # - at upper band         

Share Reservation

% of Net Issue

Institutional

75.0

Non- Institutional

25.0

Source: offer document

Company Background

Embassy Office Parks REIT’s (Embassy REIT) Portfolio comprises seven best-in-class office parks and four prime city-center office buildings totaling 32.7 msf as of December 31, 2018, with strategic amenities, including two completed and two under-construction hotels totaling 1,096 keys, food courts, employee transportation and childcare facilities. It has invested in amongst the highest quality assets in the key office markets of Bengaluru, Pune, Mumbai and Noida.

Issue Details

The issue consists of Fresh Issue of up to 15.8cr units.

Financials

Consolidated Rs.Cr

FY16

FY17

FY18

9MFY19

Revenue from operations

1,397

1,485

1,612

1376

Growth (%) yoy

-

6.3

8.5

-

EBITDA*

1,229

1,240

1,241

1,139

EBITDA margin (%)

88.0

83.5

77.0

82.7

Reported PAT

93

177

257

285

Source: Company, 5Paisa

For additional information and risk factors please refer to the Offer Document. Please note that this document is for information purpose only.

*EBITDA is excluding share of profit of equity accounting investees

Key Points

India is the sixth-largest and the fastest growing major economy in the world and has become a leading services hub for global corporates over the last 20 years. As the owner of one of India’s largest Grade A office portfolios, Embassy REIT is in a prime position to continue to capitalize on this incredible growth story and the sustained demand from services sector tenants (72.2% of its tenant base) for Grade A office space.

Although its properties have world class infrastructure and high-quality tenants, capital values for our assets as per CBRE’s valuation are $150 per square foot as of March 31, 2018, implying a 82.9%-95.2% discount to Grade A properties in New York, Tokyo and Hong Kong. Moreover, capitalization rates for such properties in India at 7.5%-8.5% represent a 175-575 bps premium to capitalization rates for assets of similar quality and tenant profile in countries like the US, Japan and China.

Key Risk

Its Gross Rentals as of December 31, 2018 and March 31, 2018, 2017 and 2016 from its top 10 tenants amounted to 42.31%, 44.84%, 46.72% and 48.35%, respectively of its combined Gross. Rentals as of these dates. Tenants in the technology industry accounted for approximately 49.40%, 49.48%, 52.76% and 56.15% of its combined Gross Rentals over the same period.

Its Leases with tenants across our Portfolio may expire and may not be renewed. The Asset SPVs and Investment Entity may face delays in finding suitable tenants which could also have an adverse impact on the revenue from the Portfolio Assets and the Portfolio Investment.

Summary of key line items for the period of Projections

INR cr, except percentages

FY2019

FY2020

FY2021

Portfolio Assets

Revenue from operations

1,882

2,304

2,512

NOI(1)

1,614

1,967

2,145

NOI Margin (%)

86%

85%

85%

EBITDA(2)

1,517

1,856

2,026

EBITDA Margin (%)

81%

81%

81%

Cash flows from operating activities

1,349

1,608

1,825

Portfolio Investment

Revenue from operations

343

400

416

NOI(1)

330

388

405

NOI Margin (%)

96%

97%

97%

EBITDA(2)

310

364

379

EBITDA Margin (%)

90%

91%

91%

Cash flows from operating activities

272

281

303

NDCF for Embassy Office Parks Group(3)

1,634

1,910

2,074

  1. For details in relation to NOI, refer to General Terms, Definitions and Abbreviations
  2.  For details in relation to EBITDA, refer to General Terms, Definitions and Abbreviations
  3. For details in relation to NDCF, refer to General Terms, Definitions and Abbreviations

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Embassy Office Parks REIT- Information Note

07 Aug 2019

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens- March 18, 2019
Issue Closes- March 20, 2019
Price Band- Rs299- 300
Issue Size- 15.8cr units
Allocation to Strategic Investors~2.9cr units
Net Issue Size-~12.9cr units
Issue Size#- ~Rs4,750 cr
Post Issue MCap#- Rs23,046cr
Bid Lot- 800 units

 Note: # - at upper band         

Share Reservation

% of Net Issue

Institutional

75.0

Non- Institutional

25.0

Source: offer document

Company Background

Embassy Office Parks REIT’s (Embassy REIT) Portfolio comprises seven best-in-class office parks and four prime city-center office buildings totaling 32.7 msf as of December 31, 2018, with strategic amenities, including two completed and two under-construction hotels totaling 1,096 keys, food courts, employee transportation and childcare facilities. It has invested in amongst the highest quality assets in the key office markets of Bengaluru, Pune, Mumbai and Noida.

Issue Details

The issue consists of Fresh Issue of up to 15.8cr units.

Financials

Consolidated Rs.Cr

FY16

FY17

FY18

9MFY19

Revenue from operations

1,397

1,485

1,612

1376

Growth (%) yoy

-

6.3

8.5

-

EBITDA*

1,229

1,240

1,241

1,139

EBITDA margin (%)

88.0

83.5

77.0

82.7

Reported PAT

93

177

257

285

Source: Company, 5Paisa

For additional information and risk factors please refer to the Offer Document. Please note that this document is for information purpose only.

*EBITDA is excluding share of profit of equity accounting investees

Key Points

India is the sixth-largest and the fastest growing major economy in the world and has become a leading services hub for global corporates over the last 20 years. As the owner of one of India’s largest Grade A office portfolios, Embassy REIT is in a prime position to continue to capitalize on this incredible growth story and the sustained demand from services sector tenants (72.2% of its tenant base) for Grade A office space.

Although its properties have world class infrastructure and high-quality tenants, capital values for our assets as per CBRE’s valuation are $150 per square foot as of March 31, 2018, implying a 82.9%-95.2% discount to Grade A properties in New York, Tokyo and Hong Kong. Moreover, capitalization rates for such properties in India at 7.5%-8.5% represent a 175-575 bps premium to capitalization rates for assets of similar quality and tenant profile in countries like the US, Japan and China.

Key Risk

Its Gross Rentals as of December 31, 2018 and March 31, 2018, 2017 and 2016 from its top 10 tenants amounted to 42.31%, 44.84%, 46.72% and 48.35%, respectively of its combined Gross. Rentals as of these dates. Tenants in the technology industry accounted for approximately 49.40%, 49.48%, 52.76% and 56.15% of its combined Gross Rentals over the same period.

Its Leases with tenants across our Portfolio may expire and may not be renewed. The Asset SPVs and Investment Entity may face delays in finding suitable tenants which could also have an adverse impact on the revenue from the Portfolio Assets and the Portfolio Investment.

Summary of key line items for the period of Projections

INR cr, except percentages

FY2019

FY2020

FY2021

Portfolio Assets

Revenue from operations

1,882

2,304

2,512

NOI(1)

1,614

1,967

2,145

NOI Margin (%)

86%

85%

85%

EBITDA(2)

1,517

1,856

2,026

EBITDA Margin (%)

81%

81%

81%

Cash flows from operating activities

1,349

1,608

1,825

Portfolio Investment

Revenue from operations

343

400

416

NOI(1)

330

388

405

NOI Margin (%)

96%

97%

97%

EBITDA(2)

310

364

379

EBITDA Margin (%)

90%

91%

91%

Cash flows from operating activities

272

281

303

NDCF for Embassy Office Parks Group(3)

1,634

1,910

2,074

  1. For details in relation to NOI, refer to General Terms, Definitions and Abbreviations
  2.  For details in relation to EBITDA, refer to General Terms, Definitions and Abbreviations
  3. For details in relation to NDCF, refer to General Terms, Definitions and Abbreviations

Research Disclaimer