Embassy Office Parks Reit · NSE:EMBASSY.RR
Embassy Office Parks Reit — Q3 FY2023 Earnings Presentation
52 slides from Embassy Office Parks Reit's earnings presentation, Jan 25, 2023
Slide 1: Embassy Office Parks REIT Q3 FY2023 Earnings Materials
Embassy Office Parks REIT Q3 FY2023 Earnings Materials January 25, 2023 1
Slide 2: Press Release: Record 4.4 Million Square Feet Leases YTD FY2023
Q3 FY2023 Earnings Materials Press Release Embassy REIT Delivers Record 4.4 Million Square Feet Leases YTD FY2023 • Leased 4.4 msf YTD FY2023 across 71 deals including 19 deals totaling 1 msf in Q3; Achieved around 90% of annual guidance • Grew Net Operating Income by 13% YoY and distributed 100% of
Slide 3: Press Release (Cont'd)
Q3 FY2023 Earnings Materials Press Release (Cont’d) Financial Highlights • Grew Net Operating Income by 13% YoY to ₹7,049 million, with healthy operating margin of 81% • Announced distributions of ₹5,033 million or ₹5.31 per unit, marking 15th consecutive quarter of 100% payouts • Maintained strong
Slide 4: Table of Contents
Q3 FY2023 Earnings Materials Table of Contents I. Key Highlights 5 II. Leasing Update 11 III. Development Update 18 IV. Acquisitions Update 25 V. ESG & Total Business Ecosystem Update 29 VI. Financial Update 36 VII. Market Outlook 40 VIII. Appendix 43 4
Slide 5: I. Key Highlights
Q1 FY2022 Earnings Materials I. Key Highlights Hilton Hotel Complex, Embassy Manyata
Slide 6: Record Fresh Leasing, Accelerating Growth Investments
Q3 FY2023 Earnings Materials I. Key Highlights Record Fresh Leasing, Accelerating Growth Investments LEASING DEVELOPMENT UNLOCKING GROWTH Leased 1 msf across 19 deals at 13% spreads; Accelerated development of 6.6 msf active growth Launched 0.4 msf new office development at grew same-store occupancy
Slide 7: Robust Financial Performance
Q3 FY2023 Earnings Materials I. Key Highlights Robust Financial Performance NOI and EBITDA for Q3 up 13% and 14% YoY, with overall NOI and EBITDA margins at 81% and 80% respectively Q3 FY2023 Q3 FY2022 Variance % Remarks (mn) (mn) Revenue from new lease-up and rent escalations, partially Revenue o
Slide 8: Fortress Balance Sheet with Active Debt Management
Q3 FY2023 Earnings Materials I. Key Highlights Fortress Balance Sheet with Active Debt Management Achieved 7.2% interest cost for ₹139 billion debt book, with ~92% of debt at fixed rate in near term Significant Reduction in Our Cost of Debt Since Listing 27% % Interest Rate 10.5 Leverage(1) 9.5 8.5
Slide 9: India: The Office to the World
Q3 FY2023 Earnings Materials I. Key Highlights India: The Office to the World India office remains a long-term growth opportunity, led by dual structural drivers of cost efficiency and abundant STEM talent offered by India’s gateway cities India’s Dual Structural Advantage Continues GCC additions in
Slide 10: Bangalore Continues to Lead India's Office Resurgence
Q3 FY2023 Earnings Materials I. Key Highlights Bangalore Continues to Lead India’s Office Resurgence Bangalore continues to be Asia’s leading office market given its strong tech ecosystem. Embassy REIT’s portfolio concentration in Bangalore market remains a key advantage Largest Tech, Start-up and G
Slide 11: II. Leasing Update
Q1 FY2022 Earnings Materials II. Leasing Update Embassy Quadron, Pune
Slide 12: High Quality, Diversified Occupier Base
Q3 FY2023 Earnings Materials II. Leasing Update High Quality, Diversified Occupier Base Tech occupiers and Global Captives constitute over 70% of our occupier base Industry Diversification(1) Top 10 % of Sector Financial Services Occupiers Rentals Technology 20% JP Morgan Financial Services 6.7% 38%
Slide 13: Back to Office Ramp-up
Q3 FY2023 Earnings Materials II. Leasing Update Back to Office Ramp-up Continuing the positive ramp-up since Q1, back to office at Embassy REIT’s properties up ~30% Q-o-Q. Physical attendance at ~46% in mid-Jan’23, highest since the last two years Park attendance (‘000) 1 January 18, 2023 - 105k “…t
Slide 14: Continued Leasing Momentum
Q3 FY2023 Earnings Materials II. Leasing Update Continued Leasing Momentum Leased 1 msf across 19 deals in Q3 at 13% leasing spreads, including robust fresh leasing and early renewals. Bangalore continues to drive pan-India demand momentum Total Leasing in FY 491k sf 2.5 2.1 4.1 3.9 3.8 1.2 2.2 4.4
Slide 15: Leasing Highlights for Q3 FY2023
Q3 FY2023 Earnings Materials II. Leasing Update Leasing Highlights for Q3 FY2023 Added 7 new occupiers on the back of robust fresh leasing and renewals driven by global captives Area Occupier Property Sector ('000 sf) Danish Pharma Major New Leases 491 American Retail Major Embassy Manyata Retail GC
Slide 16: Mark-to-Market Potential
Q3 FY2023 Earnings Materials II. Leasing Update Mark-to-Market Potential Successfully renewed 1.8 msf YTD at 17% spreads, including 0.4 msf of early renewals in Q3 27% of Leases Expire Between FY2023–27 Lease Expiries Update Area Expiring (msf) YTD Renewals Likely Exits in Q4 3.9 1.8 msf 0.04 msf 4%
Slide 17: Embedded Rent Growth
Q3 FY2023 Earnings Materials II. Leasing Update Embedded Rent Growth Achieved 13% rent escalations on 2.1 msf in Q3, which further contributes to NOI growth. On track for additional 14% rent escalations on balance 1.6 msf in Q4 Market Rents 17% Above In-place Rents Embedded Rent Escalations of ~15%
Slide 18: III. Development Update
Q1 FY2022 Earnings Materials III. Development Update Embassy TechVillage – JP Morgan BTS, Bangalore
Slide 19: Attractive Development Pipeline
Q3 FY2023 Earnings Materials III. Development Update Attractive Development Pipeline Accelerated development on 6.6 msf active growth pipeline at highly attractive 24% yield(1), with around 90% concentrated in Bangalore, India’s best performing office market Development Pipeline(2) (msf) Development
Slide 20: Unlocking Growth at Embassy TechVillage
Q3 FY2023 Earnings Materials III. Development Update Unlocking Growth at Embassy TechVillage Launched another highly accretiveEmbassy 0.4 msf TechVillage office block Helenium –Block at ETV at accretive 24% yield; project 6 (0.4 msf) efficiently unlocks ETV’s overall FAR potential ~410k sf Increase
Slide 21: Unlocking Growth at Embassy Manyata
Q3 FY2023 Earnings Materials III. Development Update Unlocking Growth at Embassy Manyata Continued progress on the recently launched 1.2 msf redevelopment at Embassy Manyata at highly accretive 22% yield ~1.7x Increase in Leasable Area ₹6 billion Capex Planned ~22% Yield on Cost(1) Dec’25 Target Com
Slide 22: Project Progress at Site (Cont'd)
Q3 FY2023 Earnings Materials III. Development Update Project Progress at Site (Cont’d) Embassy Manyata – M3 Block A (1.0 msf) Embassy Manyata – M3 Block B (0.6 msf) Design Perspective Perspective Perspective Targeting Mar’23 delivery Targeting Mar’25 delivery Actual Progress at Site(1) Actual Pictur
Slide 23: Project Progress at Site
Q3 FY2023 Earnings Materials III. Development Update Project Progress at Site Embassy Manyata – L4 Block A (0.7 msf) Embassy TechVillage – Block 8 (1.9 msf) Design Perspective Perspective Perspective On-track for Jun’25 delivery On-track for Sep’24 delivery Actual Progress at Site(1) Actual Picture
Slide 24: Project Progress at Site (Cont'd)
Q3 FY2023 Earnings Materials III. Development Update Project Progress at Site (Cont’d) Embassy TechZone – Hudson and Ganges (0.9 msf)(1) Embassy Oxygen – Tower 1 (0.7 msf) Design Perspective Perspective Perspective Delivered in Nov’22 On-track for Jun’23 delivery Actual Progress at Site(2) Actual Pi
Slide 25: IV. Acquisitions Update
Q3 FY2023 Earnings Materials IV. Acquisitions Update 25 Embassy TechVillage, Bangalore
Slide 26: Potential Acquisition Opportunities
Q3 FY2023 Earnings Materials IV. Acquisitions Update Potential Acquisition Opportunities Evaluating acquisition of 7.1 msf properties across Bangalore and Chennai(1). Currently, 2 msf is completed or nearing completion, of which 91% is leased or pre-committed to global occupiers Embassy Splendid Tec
Slide 27: Embassy Splendid TechZone, Chennai
Q3 FY2023 Earnings Materials IV. Acquisitions Update Embassy Splendid TechZone, Chennai Opportunity to acquire a 5 msf(1) high-quality business park and enter a new growth market in Chennai city. Of the 1.4 msf completed area, 89% leased to global occupiers across banking and technology Actual Pictu
Slide 28: Embassy Business Hub, Bangalore
Q3 FY2023 Earnings Materials IV. Acquisitions Update Embassy Business Hub, Bangalore Opportunity to acquire a 2.1 msf(1) upcoming business park in close proximity to Embassy Manyata in North Bangalore. Of the 0.7 msf area nearing completion, 94% is pre-committed to Philips Actual Picture Notes: Ther
Slide 29: V. ESG & Total Business Ecosystem Update
Q1 FY2022 Earnings Materials V. ESG & Total Business Ecosystem Update Flyover at Embassy Manyata, Bangalore
Slide 30: Green Impetus across Investing, Operations and Financing
Q3 FY2023 Earnings Materials V. ESG & Total Business Ecosystem Update Green Impetus across Investing, Operations and Financing Leadership position in ESG a strong differentiator and long-term business advantage. ESG commitments aligned with the broader goals of occupiers and investors Awarded Highe
Slide 31: Recognised as World's Largest LEED Platinum portfolio
Q3 FY2023 Earnings Materials V. ESG & Total Business Ecosystem Update Recognised as World’s Largest LEED Platinum portfolio (v4.1 O+M) Notes: (1) LEED (Leadership in Energy and Environmental Design) Platinum v4.1 O+M (Operations + Maintenance) received for 33.4 msf operational portfolio; certified
Slide 32: ESG Memberships and Certifications
Q3 FY2023 Earnings Materials V. ESG & Total Business Ecosystem Update ESG Memberships and Certifications ESG memberships, certifications and performance on global benchmarks reflect commitment to sustainability, transparency and operational excellence Past Achievements Current Achievements and Focu
Slide 33: ESG Roadmap – Progress Report
Q3 FY2023 Earnings Materials V. ESG & Total Business Ecosystem Update ESG Roadmap – Progress Report In-line with our 2040 net zero commitment, 3-year sustainability targets defined across 19 ESG programs. Significant progress in YTD FY2023 Pillar Metric Target(1) YTD FY23 Update Status ► Renewable
Slide 34: Hospitality Business Continued its Growth Trajectory
Q3 FY2023 Earnings Materials V. ESG & Total Business Ecosystem Update Hospitality Business Continued its Growth Trajectory Hotel portfolio continued its performance in Q3 with occupancy at 47% and ADRs up 15% Q-o-Q . YTD EBITDA at ₹704 million, significantly ahead of annual guidance Occupancy (%) a
Slide 35: Deepening Business Moat
Q3 FY2023 Earnings Materials V. ESG & Total Business Ecosystem Update Deepening Business Moat Continued investments in campus infrastructure and amenities deepen business moat and fortify REIT’s properties for the next phase of growth 85k sf Retail Plaza at Embassy Manyata (WIP, Jun’23) Sports Zone
Slide 36: VI. Financial Update
Q1 FY2022 Earnings Materials VI. Financial Update Embassy TechZone, Pune
Slide 37: Prudent Capital Management
Q3 FY2023 Earnings Materials VI. Financial Update Prudent Capital Management Option ₹30 bn Balance1:sheet significantly Bond at REIT well Level and ₹15 positioned amidst bn LRD rising at interest Manyatarate to refinance ZCB– at environment lowanleverage, average coupon attractive rate interest of 7
Slide 38: Financial Performance for YTD FY2023
Q3 FY2023 Earnings Materials VI. Financial Update Financial Performance for YTD FY2023 NOI and EBITDA for YTD up 12% YoY, with overall NOI and EBITDA margins at 82% and 80% respectively YTD FY2023 YTD FY2022 Variance % Remarks (mn) (mn) Revenue from new lease-up at higher re-leasing spreads Revenu
Slide 39: Delivering on Distributions
Q3 FY2023 Earnings Materials VI. Financial Update Delivering on Distributions Q3 distributions stood at ₹5,033 million or ₹5.31 per unit, representing a 100% payout ratio Distribution Distribution Highlights Highlights Distribution Mix – Q3 Particulars Q3 FY2023 FY2023 till date Distribution period
Slide 40: VII. Market Outlook
Q1 FY2022 Earnings Materials VII. Market Outlook FIFC, Mumbai
Slide 41: Market Fundamentals – Update
Q3 FY2023 Earnings Materials VII. Market Outlook Market Fundamentals – Update 2022 was a resurgent year for India office with total absorption of ~53 msf, closer to pre-pandemic highs – driven by pent-up demand, expansion and consolidation requirements of multinationals Demand and Supply Trends (CY2
Slide 42: Demand and Supply Outlook
Q3 FY2023 Earnings Materials VII. Market Outlook Demand and Supply Outlook Long-term fundamentals of India office remain robust, with global captives driving demand. Supply continues to remain constrained with only 21% comparable and competing supply Demand Outlook Supply Outlook Gross Absorption (m
Slide 43: VIII. Appendix
Q1 FY2022 Earnings Materials VIII. Appendix Embassy Galaxy, Noida
Slide 44: Who We Are: Quick Facts
Q3 FY2023 Earnings Materials VIII. Appendix Who We Are: Quick Facts Embassy REIT owns and operates a commercial office portfolio that serves as essential corporate infrastructure to global occupiers, including many technology companies 43.6 msf(1)(2) 229 86% Portfolio Blue-chip Occupancy occupiers 1
Slide 45: Portfolio Summary
Q3 FY2023 Earnings Materials VIII. Appendix Portfolio Summary 34.3 msf completed Grade A office assets (86% occupied, 7 years WALE, 17% MTM opportunity) (2) (2) (3) (3) Leasable Area (msf)/Keys/MW WALE Occupancy Rent (₹ psf / mth) GAV Property Completed Development Total (yrs) (%) In-place Market MT
Slide 46: Walkdown of Key Financial Metrics
Q3 FY2023 Earnings Materials VIII. Appendix Walkdown of Key Financial Metrics Particulars (₹ mn) Q3 FY2023 Q3 FY2022 YoY Var (%) YTD FY2023 YTD FY2022 YoY Var (%) Revenue from Operations 8,654 7,409 17% 25,519 22,138 15% NOI Property Taxes and Insurance (318) (299) 6% (940) (881) 7% Direct Operating
Slide 47: Eight Infrastructure-like Office Parks (41.2 msf)
Q3 FY2023 Earnings Materials VIII. Appendix Eight Infrastructure-like Office Parks (41.2 msf)(1) Embassy Manyata Embassy TechVillage Bangalore (15.2 msf) Bangalore (9.6 msf) Embassy GolfLinks Embassy Quadron Embassy TechZone Bangalore (2.7 msf) (3.1 msf) Pune (1.9 msf) Pune (5.5 msf) Embassy Oxygen
Slide 48: Four Prime City-center Offices (2.4 msf)
Q3 FY2023 Earnings Materials VIII. Appendix Four Prime City-center Offices (2.4 msf) Express Towers FIFC Mumbai (0.5 msf) Mumbai (0.4 msf) Embassy 247 Embassy One Mumbai (1.2 msf) Bangalore (0.3 msf) 48
Slide 49: Embassy REIT Structure
Q3 FY2023 Earnings Materials VIII. Appendix Embassy REIT Structure Blackstone Embassy Sponsor Group Sponsor Entity Public Unitholders Acts on behalf Management of Unitholders Embassy Services Trustee Manager (Axis Trustee) REIT (EOPMSPL) 100% Manyata Promoters Private Limited (Embassy Manyata) 80% 5
Slide 50: Key Terms & Definitions
Q3 FY2023 Earnings Materials VIII. Appendix Key Terms & Definitions Notes: 40. NAV – Net Asset Value ► All figures in this presentation are as of Dec 31, 2022 unless otherwise specified 41. NCD – Non-Convertible Debentures ► All figures corresponding to year denoted with “FY” are as of or for the on
Slide 51: Disclaimer
Q3 FY2023 Earnings Materials VIII. Appendix Disclaimer This presentation is 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, without regards to t
Slide 52: Investor Contact
Q1 FY2022 Earnings Materials Investor Contact: Website: www.embassyofficeparks.com | Email: ir@embassyofficeparks.com | Office: +91 80 4722 2222
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