Embassy Office Parks REIT to use ₹4,200 crore from proceeds to repay debt

Bengaluru: Embassy Office Parks real estate investment trust (REIT) plans to mop up ₹ 5,250 crore through a public offering and will use around ₹ 4,200 crore of the net proceeds to repay debt.

Embassy Office Parks, co-sponsored by Blackstone Group Lp and Jitu Virwani-promoted realty firm Embassy Group, currently has total debt of around ₹ 8,556 crore, as per the draft offer document that has been filed.

It will also use another ₹ 653 crore to acquire Embassy One Assets, which is currently held by a subsidiary Embassy One Developers Pvt Ltd (EODPL). Embassy One is an ongoing project in Bengaluru, that will have a Four Seasons hotel, office and retail space.

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“...In addition to best-in-class asset management capability, we believe that our team has the expertise to capitalize on a fragmented office market and expand business through strategic acquisitions by using our strong balance sheet. Post the utilisation of the IPO proceeds, our total indebtedness is expected to be less than 15% of market value initially,” the offer document says.

The market value of the portfolio has been valued at around ₹ 30,000 crore.

The REIT office portfolio comprises 33 million sq. ft. of office and hospitality assets comprising of 7 business parks and 4 city-centric buildings spread across Mumbai, Bengaluru, Pune and Noida. Of this, 24 million sq. ft. is operational at 95% occupancy and generates an annual rental income of around ₹ 2,000 crore. It includes Blackstone’s own assets as well as those in partnership with Embassy Group.

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“After the completion of the Issue and the listing of the Units, we intend to obtain external debt financing to repay a portion of the debt of the Portfolio and to finance the Portfolio’s business and financing requirements,” it said.

It has executed an indicative and non-binding term sheet with a consortium of lenders to borrow up to ₹ 4,000 crore, subject to certain securities and financial covenants.

Mike Holland, chief executive of Embassy Office Parks, will take over as CEO of the REIT. Vikaash Khdloya, who is managing director with Blackstone Group, will be deputy chief executive and the chief operating officer.

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On Monday, credit rating agency ICRA Ltd assigned a rating of provisional AAA with stable outlook to the Embassy Office Parks REIT.