Embassy Office Parks REIT - All Eyes On Proposed Chennai RoFO Asset Acquisition: ICICI Securities

ICICI Securities Report

The Board of the real estate investment trust manager of Embassy Office Parks REIT has announced on April 06, 2024, that it has agreed to purchase Embassy Splendid TechZone, a Grade-A business park, from Embassy Sponsor, for an enterprise value of Rs 12.7 billion.

ESTZ comprises 1.4 million square feet of completed area, which is 95% occupied; also includes 1.6 msf of under-construction area, of which 0.4msf is pre-leased and 2 msf earmarked for future development.

The REIT manager intends to fund the acquisition via an equity fund raise of Rs 25 billion; subject to the transaction’s success, we estimate accretion of 2.9% to FY24 net operating income and distribution per unit.

Ex-acquisition, we currently see FY24E NOI/DPU of Rs 29.2 billion/Rs 21.7.

Retain Add; target price unchanged at Rs 405/unit, based on one time March-25E net asset value.

Key risks:

Slower recovery in office leasing; and higher portfolio vacancy levels.

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