Embassy Office Parks REIT · NSE:EMBASSY.RR
Embassy Office Parks REIT — Q1 FY2020 Earnings Presentation
51 slides from Embassy Office Parks REIT's earnings presentation, Aug 12, 2019
Slide 1: Embassy Office Parks REIT 1Q FY2020 Investor Materials
Embassy Office Parks REIT 1Q FY2020 Investor Materials August 12, 2019 1
Slide 2: Disclaimer
1Q FY2020 Investor Materials Disclaimer This presentation is prepared for Unitholders and issued by Embassy Office Parks Management Services Private Limited (the “Manager”) in its capacity as the Manager of the Embassy Office Parks REIT (“Embassy REIT”), for general information purposes only, withou
Slide 3: Table of Contents
1Q FY2020 Investor Materials Table of Contents I. Key Highlights 4 II. Overview 9 III. Market Outlook 17 IV. Commercial Office Update 22 V. Development Update 26 VI. Hospitality Update 31 VII. Financial Update 34 VIII. Other Updates 39 IX. Looking Ahead 44 X. Appendix 46 3
Slide 4: I. Key Highlights
1Q FY2020 Investor Materials I. Key Highlights Embassy Manyata, Bengaluru
Slide 5: Listing Highlights
1Q FY2020 Investor Materials I. Key Highlights Listing Highlights Listing of Embassy REIT was a landmark transaction and first of its kind in India Key Transaction Highlights First REIT to list on Indian stock exchanges Largest REIT in Asia by square footage (c.33 msf total portfolio area) Initi
Slide 6: Business Highlights
1Q FY2020 Investor Materials I. Key Highlights Business Highlights Robust leasing, timely execution of near-term development projects and active asset management has driven strong performance in 1Q FY2020 94.3% occupancy on 24.8 msf completed commercial office portfolio 595k sf new lease-up, inc
Slide 7: Financial Highlights
1Q FY2020 Investor Materials I. Key Highlights Financial Highlights Healthy Revenue from Operations and NOI for 1Q FY2020 – both higher by 19% YoY 1Q FY2020 1Q FY2019 Remarks (mn)(1) (mn)(2) Variance % Lease-up of 1.4 msf vacancy across Embassy Manyata, Revenue FIFC, Embassy 247 & others from ₹5,3
Slide 8: Distribution Overview
1Q FY2020 Investor Materials I. Key Highlights Distribution Overview Distribution for 1Q FY2020 stood at ₹4,167 mn i.e. ₹5.4 per unit with scheduled payment date on or before August 27, 2019 Distribution schedule for 1Q FY2020 Distribution for the period April 1, 2019 – June 30, 2019 Distribution am
Slide 9: II. Overview
1Q FY2020 Investor Materials II. Overview Embassy Techzone, Pune
Slide 10: Who We Are: Quick Facts
1Q FY2020 Investor Materials II. Overview Who We Are: Quick Facts We run a commercial office portfolio that serves as essential corporate infrastructure to multinational tenants 33 msf(1) 160+ 94.3% Portfolio Blue-chip Occupancy tenants Noida (9%) 11 1,096 100 MW Commercial Hotel Keys Solar Park Off
Slide 11: Seven Infrastructure-like Office Parks (30.4 msf)
1Q FY2020 Investor Materials II. Overview Seven Infrastructure-like Office Parks (30.4 msf)(1) Embassy Manyata Embassy Quadron Bengaluru (14.2 msf) Pune (1.9 msf) Embassy Golflinks Embassy Techzone Bengaluru (2.7 msf) Pune (5.5 msf) Embassy Oxygen Embassy Galaxy Embassy Qubix Noida (3.3 msf) Noida (
Slide 12: Four Prime City-center Offices (2.3 msf)
1Q FY2020 Investor Materials II. Overview Four Prime City-center Offices (2.3 msf) Express Towers FIFC Mumbai (0.5 msf) Mumbai (0.4 msf) Embassy 247 Embassy One Mumbai (1.2 msf) Bengaluru (0.3 msf) 12
Slide 13: What We Do: Our Strategy
1Q FY2020 Investor Materials II. Overview What We Do: Our Strategy Maximize distributions and NAV per unit through organic growth & new acquisitions 4 Prudent Capital Management 3 First-mover Acquisition Build leverage Advantage selectively 2 Use strong balance Deliver on Development 42.8 msf
Slide 14: Our Opportunity: India as the Global Technology Innovation Hub
1Q FY2020 Investor Materials II. Overview Our Opportunity: India as the Global Technology Innovation Hub India continues to attract global corporations for large scale services operations due to availability of abundant talent and cost savings; thereby leading to continued strong office demand India
Slide 15: Our Tenant Base
1Q FY2020 Investor Materials II. Overview Our Tenant Base Global business with a diversified portfolio across established & growth sectors Industry Diversification(1) 41% of Gross Rentals Originate From Top 10 Tenants Others 10% Top 10 % of Sector Tenants Rentals Research, Technology Consulting & 49
Slide 16: Our Portfolio Summary
1Q FY2020 Investor Materials II. Overview Our Portfolio Summary 25 msf Portfolio of Grade A office assets (94.3% occupied, 7 years WALE and 31% MTM opportunity) Leasable Area (msf)/Keys/MW WALE(3) Occupancy Rent (₹ psf / mth) GAV(4) Property Completed Development Total (yrs) (%) In-place Market(4) M
Slide 17: III. Market Outlook
1Q FY2020 Investor Materials III. Market Outlook Embassy One, Bengaluru
Slide 18: Commercial Office Fundamentals
1Q FY2020 Investor Materials III. Market Outlook Commercial Office Fundamentals Strong demand-supply fundamentals resulting in robust demand and low vacancy across our four office markets 34.7 31.9 32.4 30.4 30.7 29.6 26.9 27.5 26.4 24.5 22.5 21.9 21.8 22.1 19.2 18.6 15.5 14.5 14.2 13.8 13.2 CY2014
Slide 19: Our Markets
1Q FY2020 Investor Materials III. Market Outlook Our Markets Portfolio well positioned in India’s four key office markets Embassy REIT markets represent 75% of India’s office absorption 72% Of India’s Grade A office stock concentrated in Embassy REIT markets Others 25% Bengaluru 33% 34% Absorption g
Slide 20: City wise Market Outlook
1Q FY2020 Investor Materials III. Market Outlook City wise Market Outlook While Bengaluru continued to lead office absorption globally, Pune witnessed increased levels of activity driven by strong technology sector hiring Bengaluru continues to remain landlord favorable market with c.4% vacancy
Slide 21: Supply Outlook
1Q FY2020 Investor Materials III. Market Outlook Supply Outlook Factoring for city, location, project timing, quality etc., comparable supply for Embassy REIT projects is estimated to be a small proportion of overall market supply Stock Vacancy Rent Growth Supply 2018 Absorption 2018 Supply for 2 ye
Slide 22: IV. Commercial Office Update
1Q FY2020 Investor Materials IV. Commercial Office Update FIFC, Mumbai
Slide 23: Leasing Highlights for 1Q FY2020
1Q FY2020 Investor Materials IV. Commercial Office Update Leasing Highlights for 1Q FY2020 595k sf new leases signed across 8 deals with existing tenant expansion accounting for 57% of space take-up 1Q FY2020 Highlights Key Leases Signed New Leases signed (‘000 sf) 595 Tenant Property City Area ('00
Slide 24: Continued Leasing Momentum
1Q FY2020 Investor Materials IV. Commercial Office Update Continued Leasing Momentum Leased 595k sf in 1Q FY2020 demonstrating continued leasing momentum, of this 572k sf re-leased at 50.6% spreads Particulars 1Q FY2020 Average FY2019 FY2018 FY2017 FY2016 Completed Area msf 24.8 (2016-19) 24.8 24.2
Slide 25: Embedded Mark-to-Market Growth
1Q FY2020 Investor Materials IV. Commercial Office Update Embedded Mark-to-Market Growth Re-leased 572k sf at higher than in-place rents & c.690k sf of brought forward expiries. Opportunity to re-lease additional c.6 msf at market rents over next 3-4 years Current market rents are 31% above in-place
Slide 26: V. Development Update
1Q FY2020 Investor Materials V. Development Update Embassy Manyata, Bengaluru
Slide 27: Development Pipeline
1Q FY2020 Investor Materials V. Development Update Development Pipeline 4.0 msf on-campus new build pipeline in next 4 years. Of this, 1.4 msf near-term development projects are 2 quarters ahead of targeted delivery Development Track Record (msf) & Pipeline(1) Development Status as of August 12, 201
Slide 28: Embassy Manyata (Front Parcel)
1Q FY2020 Investor Materials V. Development Update Embassy Manyata (Front Parcel) Front Parcel at Embassy Manyata (0.8 msf commercial blocks, 58k sf retail and 619 keys hotel) currently U/C, targeting completion of commercial block in 4Q FY2020 and hotels in 3Q FY2022 NXT Office Tower 2 382k sf NXT
Slide 29: Embassy Oxygen
1Q FY2020 Investor Materials V. Development Update Embassy Oxygen 0.5 msf Tower 3 delivered in November 2018 as per schedule. 0.6 msf Tower 2 is currently nearing completion, targeting completion in 3Q FY2020; 2 quarters ahead of targeted delivery Tower 3 – 0.5 msf Tower 2 – 0.6 msf Delivered on sch
Slide 30: Existing Asset Upgrades
1Q FY2020 Investor Materials V. Development Update Existing Asset Upgrades Select infrastructure, upgrade and ancillary projects underway to further enhance competitiveness Embassy 247 – Facade work Embassy Manyata – 220KV Substation (WIP, targeting 2Q FY2020 completion) (Commissioned in 1Q FY2020)
Slide 31: VI. Hospitality Update
1Q FY2020 Investor Materials VI. Hospitality Update Hilton at Embassy Golflinks, Bengaluru
Slide 32: Hilton and Four Seasons
1Q FY2020 Investor Materials VI. Hospitality Update Hilton and Four Seasons With recent launch of Four Seasons hotel, 477 hotel keys are now operational and additional 619 keys under development at Embassy Manyata Hilton at Four Seasons at Hilton & Hilton Garden Inn at Embassy Golflinks Embassy One
Slide 33: Four Seasons Hotel Launch Update
1Q FY2020 Investor Materials VI. Hospitality Update Four Seasons Hotel Launch Update Known for its world class hospitality, Four Seasons at Embassy One commenced operations in May 2019 Lobby Swimming Pool CUR8 – All Day Dining Guest Room Notes: Aug’2019 pictures 33
Slide 34: VII. Financial Update
1Q FY2020 Investor Materials VII. Financial Update Embassy Quadron, Pune
Slide 35: Revenue Contribution by Segment & Geography
1Q FY2020 Investor Materials VII. Financial Update Revenue Contribution by Segment & Geography Commercial Office segment contributed 89% of Revenue from Operations for 1Q FY2020 Revenue from Operations (₹ mn) ₹5,351 mn Revenue from Operations (1Q FY2020)(1) % of Property City 1Q FY2020 Total Embassy
Slide 36: Revenue Drivers
1Q FY2020 Investor Materials VII. Financial Update Revenue Drivers Revenue in 1Q FY2020 was higher by 19% YoY, mainly on account of contracted escalations, new lease-ups and MTM Revenue from Operations (₹ mn) 12 68 261 516 38.8 5,351 4,494 1Q FY2019 Contracted Lease-up and Development Income from 1Q
Slide 37: Leverage Update
1Q FY2020 Investor Materials VII. Financial Update Leverage Update Successfully priced and allotted ₹30 bn NCDs, to repay existing debt and for general corporate purposes Listed NCD Issuance post IPO ₹30 bn ₹30 bn NCDs allotted on May 3, 2019 Listed NCD Issuance AAA / Stable CRISIL Rating YTM
Slide 38: Fortress Balance Sheet
1Q FY2020 Investor Materials VII. Financial Update Fortress Balance Sheet Post utilization of IPO proceeds, our conservative Balance Sheet provides significant flexibility for growth Total Enterprise Value (₹ mn) Debt to Market Capitalization As of Mar’2019 Particulars June 30, 2019 Gross Debt Marke
Slide 39: VIII. Other Updates
1Q FY2020 Investor Materials VIII. Other Updates Embassy Golflinks, Bengaluru
Slide 40: Embassy Tech Zone Case Study
1Q FY2020 Investor Materials VIII. Other Updates Embassy Tech Zone Case Study Backfilled c.75% of unscheduled vacancy from a significant tenant at Embassy Techzone at 37% re-leasing spreads without any lease void period 3Q FY2019: Anchor tenant occupying 480k sf commences Situation Overview early
Slide 41: Environment, Social & Governance
1Q FY2020 Investor Materials VIII. Other Updates Environment, Social & Governance Our focus on energy sustainability and environment conservation differentiates us from our competition 100 MW Solar Plant 100MW green energy initiative (215 mn units estimated annual capacity) supplying power to our
Slide 42: Environment, Social & Governance (cont'd)
1Q FY2020 Investor Materials VIII. Other Updates Environment, Social & Governance (cont’d) Embassy REIT has world class corporate governance standards Minimum 80% of value in completed and leased properties Asset Minimum 90% of distributable cash flows to be distributed Restrictions on specula
Slide 43: Tenant Engagement
1Q FY2020 Investor Materials VIII. Other Updates Tenant Engagement Conducted various ‘Energize’ events at properties across portfolio as part of total business eco- system offering 5-a-side Football Tournament Cricket 6-a-side League Women's Throwball World Environment Day International Yoga Day Wor
Slide 44: IX. Looking Ahead
1Q FY2020 Investor Materials IX. Looking Ahead Embassy Qubix, Pune
Slide 45: Key Growth Drivers
1Q FY2020 Investor Materials IX. Looking Ahead Key Growth Drivers Growth Levers and near-term priorities for FY2020 in-line with historic delivery Achieved Near term priority 1Q FY2020 FY2020 Four Seasons Hotel Stabilize Four Seasons launched and Hotel Hotel operational Stabilization 1.4 msf across
Slide 46: X. Appendix
1Q FY2020 Investor Materials X. Appendix Embassy Galaxy, Noida
Slide 47: Walkdown of Financial Metrics
1Q FY2020 Investor Materials X. Appendix Walkdown of Financial Metrics NOI & EBITDA margins for 1Q FY2020 were healthy at 85% & 82% respectively. Distribution payout ratio for 1Q FY2020 is 99.7% of NDCF at REIT level ₹4,180 mn (Amount in ₹ mn) (1) (2) 1Q FY2020 1Q FY2019 Total Per Unit Total Per Uni
Slide 48: REIT Fundamentals
1Q FY2020 Investor Materials X. Appendix REIT Fundamentals REIT stands for Real Estate Investment Trust A REIT is a trust that owns, operates or finances income-producing real estate • REITs give all investors access to the benefits of real estate investment with the advantage of investing in pu
Slide 49: Embassy REIT structure
1Q FY2020 Investor Materials X. Appendix Embassy REIT structure Blackstone Embassy Sponsor Groups Sponsor Entity Public Unitholders Management Trustee Embassy Services REIT Manager (Axis Acts on Behalf of (EOPMSPL) Trustee) Unitholder 100% Embassy Office Parks Private Limited (Embassy Techzone) 36%
Slide 50: Key Terms & Definitions
1Q FY2020 Investor Materials X. Appendix Key Terms & Definitions Notes: 27. MTM – Mark to Market ► All figures in this presentation are as of June 30, 2019 unless specified otherwise 28. MW – Mega-Watt 29. Mumbai – Refers to Mumbai Metropolitan Region (MMR) ► All figures corresponding to year denote
Slide 51: 1Q FY2020 Investor Materials
1Q FY2020 Investor Materials
Embassy Office Parks REIT — Q1 FY2020 Earnings Presentation on 6ix