Embassy REIT shares jump on fund raising news

Shares of Embassy Office Parks REIT rose 0.8% in afternoon trade after the company said its board will meet on April 6 to consider and approve fund raising.

The company did not provide details on the nature or amount of fund raising even though a recent media report said the fund raising could be to the tune of approximately ₹3,337 crore.

Real estate investment trusts (REITs) are entities that hold mostly fully developed commercial real estate assets in the form of office and retail units. Income from the assets is paid out to investors in the REIT to the extent of their shareholding.

REITs have emerged as an investment option for investors who are looking to benefit from growth in India’s commercial real estate. Besides dividends that are paid out in the form of rental income distribution, a REIT can also provide opportunity in the form of capital appreciation.

The Embassy REIT is India’s largest REIT, which manages 45.4 million square feet of assets and has 13 office parks spread primarily across Bengaluru and a few other cities. According to its website, the company has 244 blue-chip occupiers, and its properties have an occupancy rate of 84%, with 46% of its rental income coming from Fortune 500 companies.

The company commands a market cap of over ₹35,000 crore and in 2023, clocked a net operating income of ₹3,531 crore.

Embassy REIT shares have risen 18.9% over the past one year and the company has a dividend yield of 5.64% based on the current market price.

In a recent interview, the company management said it is looking at growing both organically and inorganically, by way of improvements in occupancy rate as well as acquiring new properties in Bengaluru and Chennai.

According to Knight Frank, the commercial real estate sector saw 59 million square feet coming to the market in 2023, only slightly less than the pre-COVID peak of 60 million. The company sees growth of 7-8% in 2024, which it said would be the highest ever.