In a significant move to expand its portfolio, Embassy Office Parks REIT (Embassy REIT) has successfully raised Rs 1,200 crore in debt to finance the acquisition of Embassy Splendid TechZone (ESTZ), a premier business park in Chennai.
This strategic acquisition, valued at Rs 1,185 crore, was primarily funded through the recent debt raise at an interest rate of 8.05%, supplemented by internal accruals. The deal enhances Embassy REIT's total portfolio by 11%, bringing it to a substantial 50.5 million square feet. Future growth prospects include 1.6 million square feet of on-campus development and an additional 2 million square feet earmarked for future development.
Aravind Maiya, CEO of Embassy REIT, commented on the funding strategy: "While we evaluated funding this acquisition by issuing equity, we decided to finance it through debt and internal accruals, in the best interest of all our stakeholders. Given our diverse unitholder base and 92% public float, we will consider raising equity for defined purposes when the markets are more conducive."
The acquisition price of Rs 1,185 crore reflects a 9.2% discount to the average of two independent valuation reports. This transaction is projected to be accretive by 2% and 0.2% to the company's FY2025 mid-point net operating income (NOI) and distribution per unit (DPU) guidance, respectively, and will also enhance the net asset value (NAV) by 0.2% on a proforma basis by March 2024.
Embassy REIT anticipates stable cash flows from the ESTZ, which boasts a 95% occupancy rate across 1.4 million square feet of completed buildings. These spaces are leased to prominent tenants such as Wells Fargo and BNY Mellon, ensuring a steady income stream.
© 2023 Rera News. All rights reserved.