Embassy Office Parks REIT · NSE:EMBASSY.RR
Embassy Office Parks REIT — Q1 FY2022 Earnings Presentation
51 slides from Embassy Office Parks REIT's earnings presentation, Jul 28, 2021
Slide 1: Embassy Office Parks REIT 1Q FY2022 Earnings Materials
Embassy Office Parks REIT 1Q FY2022 Earnings Materials July 28, 2021 1
Slide 2: Press Release
1Q FY2022 Earnings Materials Press Release Embassy REIT Announces First Quarter FY2022 Results, Gears up for Demand Rebound • Leases 545k sf across 9 deals, achieves 13% leasing spreads • Grows Net Operating Income by 36% YoY, to distribute ₹5,346 million with 80% being tax-free • Sees new growth op
Slide 3: Press Release (Cont’d)
1Q FY2022 Earnings Materials Press Release (Cont’d) Business Highlights • Total lease-up of 545k sf across 9 deals, achieved 13% leasing spreads • Achieved stable portfolio occupancy of 89% with successful rent increases of 13% on 2.2 msf leases • Ongoing construction on 5.7 msf development projects
Slide 4: Table of Contents
1Q FY2022 Earnings Materials Table of Contents I. Key Highlights 5 II. Overview 14 III. Market Outlook 19 IV. Navigating COVID-19 23 V. Commercial Office Update 25 VI. Development Update 29 VII. Asset Management Update 33 VIII. Financial Update 38 IX. Appendix 42 4
Slide 5: I. Key Highlights
1Q FY2022 Earnings Materials I. Key Highlights Embassy TechVillage, Bangalore
Slide 6: Resilient Business Performance
1Q FY2022 Earnings Materials I. Key Highlights Resilient Business Performance LEASING JP Morgan(1) CAMPUS DEVELOPMENT Leased 545k sf across 9 deals, achieved Achieved top-out of 1.1 msf BTS in Continued construction on 4.6 msf new 13% leasing spreads Mar’21, target handover by Dec’21 build, targeted
Slide 7: Robust Financial Performance
1Q FY2022 Earnings Materials I. Key Highlights Robust Financial Performance NOI and EBITDA for Q1 up 36% and 33% year-on-year respectively with NOI and EBITDA margins at 84% and 81% respectively 1Q FY2022 1Q FY2021 Variance % Remarks (mn) (mn) Revenue from ETV’s 6.1 msf completed area(2) Revenue
Slide 8: Delivering on Distributions
1Q FY2022 Earnings Materials I. Key Highlights Delivering on Distributions Distribution for Q1 stood at ₹5,346 mn i.e., ₹5.64 per unit with 80% of distributions tax-free for Unitholders Distribution Highlights Distribution Mix Particulars 1Q FY2022 Distribution period Apr'21 – Jun'21 Interest 20% Di
Slide 9: Fueled by Global Technology
1Q FY2022 Earnings Materials I. Key Highlights Fueled by Global Technology Tech occupiers (incl. Global Captive Centers) constitute over 70% of our occupier base Industry Diversification(1) 38% of Gross Rent From Top 10 Occupiers Financial Services 14% Top 10 % of Technology Sector Occupiers Rentals
Slide 10: Tech Enabled Business Transformation
1Q FY2022 Earnings Materials I. Key Highlights Tech Enabled Business Transformation Covid has accelerated digital transformation resulting in record tech spends, and a global tech mega trend. Digital services to grow at 20-25% CAGR over next 5 years Record Global Tech Spends(1) Cloud and Digital Tec
Slide 11: India – The Global Digital Talent Nation
1Q FY2022 Earnings Materials I. Key Highlights India – The Global Digital Talent Nation India’s tech industry continues to report record earnings, hiring and business pipeline. Attracting and retaining Indian tech talent is a key priority for these global businesses Surge in India’s Digital Economy(
Slide 12: Expanding Our ‘Total Business Ecosystem’
1Q FY2022 Earnings Materials I. Key Highlights Expanding Our ‘Total Business Ecosystem’ Embassy REIT’s ecosystem continues to be a key differentiator for global occupiers. Our 5.7 msf development pipeline helps us meet occupier growth needs Embassy TechVillage - JP Morgan BTS (1.1 msf) Embassy Manya
Slide 13: Capitalizing on Growth Opportunities
1Q FY2022 Earnings Materials I. Key Highlights Capitalizing on Growth Opportunities Our fortress balance sheet provides us flexibility and positions us to capitalize on growth opportunities Strong Balance Sheet Robust Development Pipeline ₹15 bn 5.7 msf 70% Cash & Undrawn Committed Facilities(1) Cur
Slide 14: II. Overview
1Q FY2022 Earnings Materials II. Overview Express Towers, Mumbai
Slide 15: Who We Are: Quick Facts
1Q FY2022 Earnings Materials II. Overview Who We Are: Quick Facts We run a commercial office portfolio that serves as essential corporate infrastructure to global occupiers, including many technology companies 42.4 msf(1) 190 88.8% Portfolio Blue-chip Occupancy occupiers 12 1,614(1) 100 MW NCR (7%)
Slide 16: Eight Infrastructure-like Office Parks (40.1 msf)
1Q FY2022 Earnings Materials II. Overview Eight Infrastructure-like Office Parks (40.1 msf)(1) Embassy Manyata Embassy TechVillage Bangalore (14.8 msf) Bangalore (9.2 msf) Embassy Golflinks GolfLinks Embassy Quadron Embassy TechZone Bangalore (2.7 msf) (2.7 msf) Pune (1.9 msf) Pune (5.5 msf) Embassy
Slide 17: Four Prime City-center Offices (2.3 msf)
1Q FY2022 Earnings 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) Bangalore (0.3 msf) 17
Slide 18: What We Do: Our Strategy
1Q FY2022 Earnings Materials II. Overview What We Do: Our Strategy Maximize distribution and NAV per unit through leasing, on-campus developments and acquisitions 4 Capital 3 Management Acquisitions Build leverage 2 selectively On-campus Use strong balance Capitalize on 1 Development sheet to
Slide 19: III. Market Outlook
1Q FY2022 Earnings Materials III. Market Outlook FIFC, Mumbai
Slide 20: Market Fundamentals – Update
1Q FY2022 Earnings Materials III. Market Outlook Market Fundamentals – Update Occupiers continued to adopt a watchful approach and prioritized employee vaccination. Pre-leasing commitments have been largely intact with limited downsizing activities by large corporates Absorption Trends (CY2017 – to
Slide 21: Market Fundamentals – Demand Trends
1Q FY2022 Earnings Materials III. Market Outlook Market Fundamentals – Demand Trends Leasing momentum likely to rebound in 2022. Given growth acceleration, Tech sector and GCCs to remain at the heart of office recovery Proforma Demand Analysis Demand Trends Gross Absorption (msf) Short-term Outloo
Slide 22: Market Fundamentals – Supply Trends
1Q FY2022 Earnings Materials III. Market Outlook Market Fundamentals – Supply Trends Supply continues to be impacted with over 25% shrinkage since the start of COVID-19 pandemic. Competing supply for REIT is significantly lower at 11% of announced supply for next 2 years Supply Trends Comparable and
Slide 23: IV. Navigating COVID-19
1Q FY2022 Earnings Materials IV. Navigating COVID-19 Embassy One, Bangalore
Slide 24: COVID-19 Operations Update
1Q FY2022 Earnings Materials IV. Navigating COVID-19 COVID-19 Operations Update Covid related restrictions in Q1 by State Governments disrupted back-to-office plans. Given steady decline in cases, there is a 23% uptick in employees working from our properties in Jul’21 COVID-19 in India ‒ Covid re
Slide 25: V. Commercial Office Update
1Q FY2022 Earnings Materials V. Commercial Office Update Embassy Quadron, Pune
Slide 26: Leasing Highlights
1Q FY2022 Earnings Materials V. Commercial Office Update Leasing Highlights 545k sf total lease-up across 9 deals in Q1, comprising of 161k sf new lease-up at 17% re-leasing spread and 384k sf renewals at 10% renewal spread 1Q FY2022 Highlights Leases Signed New Leases signed (‘000 sf) (A) 161 Occup
Slide 27: Embedded Rent Escalations
1Q FY2022 Earnings Materials V. Commercial Office Update Embedded Rent Escalations Achieved rent escalations of 13% on 2.2 msf across 32 leases in Q1, representing 100% of scheduled escalations. On track for 14% rent escalations due on 5.5 msf across 57 leases in FY2022 Market Rents 28% above in-pla
Slide 28: Embedded Mark-to-Market Potential
1Q FY2022 Earnings Materials V. Commercial Office Update Embedded Mark-to-Market Potential Successfully renewed 0.4 msf in Q1 at 10% MTM spreads. 1.2 msf leases representing 3% of annual rents are likely exits with a mark-to-market potential of over 80%opportunity 23% of Leases expire between FY2022
Slide 29: VI. Development Update
1Q FY2022 Earnings Materials VI. Development Update Embassy TechVillage – JP Morgan BTS, Bangalore
Slide 30: Development Pipeline
1Q FY2022 Earnings Materials VI. Development Update Development Pipeline Ongoing construction on 5.7 msf development projects. Second wave induced disruptions in Q1 to impact project delivery timelines by 1 quarter Development Pipeline(1) (msf) Development Status as of July 27, 2021 Area (msf) JP
Slide 31: Design Perspective
1Q FY2022 Earnings Materials VI. Development Update Development Projects Embassy TechVillage - JP Morgan BTS (1.1 msf) Embassy Manyata – M3 Block A (1.0 msf) Design Perspective Actual Progress at Site(1) Note: (1) Jul’21 pictures 31
Slide 32: Design Perspective
1Q FY2022 Earnings Materials VI. Development Update Development Projects (Cont’d) Embassy Oxygen – Tower 1 (0.7 msf) Embassy TechZone – Hudson and Ganges (0.9 msf) Design Perspective Actual Progress at Site(1) Note: (1) Jul’21 pictures 32
Slide 33: VII. Asset Management Update
1Q FY2022 Earnings Materials VII. Asset Management Update Embassy Qubix, Pune
Slide 34: Deepening Our Business Moat
1Q FY2022 Earnings Materials VII. Asset Management Update Deepening Our Business Moat Our continued investments in infrastructure and amenities create entry barriers and fortifies our properties for the next phase of growth Flyover at Embassy Manyata (WIP, Sep’21) North Side Skywalk at Embassy Manya
Slide 35: Embassy Quadron Asset Re-positioning
1Q FY2022 Earnings Materials VII. Asset Management Update Embassy Quadron Asset Re-positioning Comprehensive asset re-positioning at Embassy Quadron on track for Sep’21 completion New Revamped Lobbies (Completed, Dec’20) Entry Portal (WIP, Sep’21) *Perspective Outdoor Food-court (Completed, Mar’21)
Slide 36: Infrastructure and Upgrade Projects
1Q FY2022 Earnings Materials VII. Asset Management Update Infrastructure and Upgrade Projects Construction underway for 619 keys dual branded Hilton hotels at Embassy Manyata. Pre-operational activities initiated, on track for Jun’22 launch Hilton Garden Inn: 4-Star Hilton Hotel: 5-Star 353 keys 266
Slide 37: Hospitality Update
1Q FY2022 Earnings Materials VII. Asset Management Update Hospitality Update Occupancy of our 477 keys operating hotel portfolio remained subdued in Q1 given Covid disruptions and continuing travel restrictions Hilton at Embassy GolfLinks Four Seasons at Embassy One Hilton Hotels at Embassy Manyata
Slide 38: VIII. Financial Update
1Q FY2022 Earnings Materials VIII. Financial Update Embassy TechZone, Pune
Slide 39: Walkdown of Key Financial Metrics
1Q FY2022 Earnings Materials VIII. Financial Update Walkdown of Key Financial Metrics Particulars (₹mn) 1Q FY2022 1Q FY2021 Variance (%) Revenue from Operations 7,376 5,162 43% NOI Property Taxes and Insurance (284) (193) 47% Direct Operating Expenses (879) (400) 120% Net Operating Income 6,213 4,56
Slide 40: Strong Balance Sheet with Significant Debt Headroom
1Q FY2022 Earnings Materials VIII. Financial Update Strong Balance Sheet with Significant Debt Headroom With significant debt headroom of ₹121 bn, our conservative Balance Sheet provides flexibility to pursue growth through on-campus development and accretive acquisitions Net Debt to Market Capitali
Slide 41: Debt Maturity Schedule
1Q FY2022 Earnings Materials VIII. Financial Update Debt Maturity Schedule Our 9.3% ₹36.5 billion listed bond issued in May’19 is due for redemption in Jun’22. Call option available for early redemption in Nov’21 7.5% 9.3% 6.7% 7.2% 7.2% 43,607 (Outstanding debt amount in ₹ mn) 38,462 19,591 36,500
Slide 42: IX. Appendix
1Q FY2022 Earnings Materials IX. Appendix Embassy Galaxy, Noida
Slide 43: Portfolio Summary
1Q FY2022 Earnings Materials IX. Appendix Portfolio Summary 32.3 msf completed Grade A office assets (88.8% occupied, 6.9 years WALE, 28% MTM opportunity) Leasable Area (msf)/Keys/MW (2) Occupancy Rent (₹ psf / mth) (3) WALE GAV Property Completed Development Total (yrs) (%) In-place Market MTM (%)
Slide 44: ESG Initiatives - Our Roadmap
1Q FY2022 Earnings Materials IX. Appendix ESG Initiatives - Our Roadmap Our Environment, Social and Governance (ESG) Framework comprises of 3 pillars - Resilient Planet, Revitalized Communities and Responsible Business ESG Framework Progress and Path ahead ► Green Energy Initiatives – 100 MW Water s
Slide 45: ESG Initiatives - Resilient Planet
1Q FY2022 Earnings Materials IX. Appendix ESG Initiatives - Resilient Planet Our framework is driven by the vision “Reimagining Spaces” for a sustainable tomorrow for our planet and our communities Current Memberships and Certifications 100 MW (AC) Solar Plant (Reduces 200mn kg CO2 emissions annuall
Slide 46: ESG Initiatives - Revitalized Communities
1Q FY2022 Earnings Materials IX. Appendix ESG Initiatives - Revitalized Communities Our goal is to build a sustainable eco-system and actively contribute to the social economic and environmental development of our communities Corporate Connect Program Digital Learning Platform for Government School
Slide 47: ESG Initiatives - Responsible Business
1Q FY2022 Earnings Materials IX. Appendix ESG Initiatives - Responsible Business Embassy REIT has adopted strong corporate governance standards Minimum 80% of value in completed and income generating Asset Minimum 90% of distributable cash flows to be distributed Restrictions on vacant land ac
Slide 48: Embassy REIT Structure
1Q FY2022 Earnings Materials IX. 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% 100% Simplification of ETV’s Manyata Promoters 100% Embassy
Slide 49: Key Terms & Definitions
1Q FY2022 Earnings Materials IX. Appendix Key Terms & Definitions Notes: 42. NCD – Non-Convertible Debentures ► All figures in this presentation are as of June 30, 2021 43. NDCF refers to Net Distributable Cash Flows ► All figures corresponding to year denoted with “FY” are as of or for the one-year
Slide 50: Disclaimer
1Q FY2022 Earnings Materials IX. 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 the
Slide 51: Investor Contact
Investor Contact: Website: www.embassyofficeparks.com | Email: ir@embassyofficeparks.com | Office: +91 80 4722 2222
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