Embassy Office Parks REIT: Opportunity amidst the uncertainty 🏢

It’s been two full years of operations since the listing for Embassy Office Parks REIT, India’s first listed office space REIT and during both years EOPREIT has delivered the payouts to the unit holders as per the set targets.

For the pandemic year of 2020-21, the cumulative payout per unit for the year was Rs. 21.48/- paid quarterly. The payout ratio stood at 100%, against the stipulated 90% for the REIT.

FY 20-21 highlights for EOPREIT
FY 19-20 highlights for EOPREIT

After the distribution per unit, the most sought after figure would be the Net Operating Income (NOI) which grew 12% yoy for EOPREIT.

But going ahead, for FY 22, the REIT has decided to be prudent in giving out any guidance in advance regarding the distributions. So it’s wait and watch. The second wave of the pandemic has definitely put on hold the back to office plans for the tenants of EOPREIT. Also many employers has made it mandatory that the employees get vaccinated before retuning to office. This stipulation combined with the shortage of vaccines in the country has compounded the uncertainty of office re-openings. The company has said that in the next two quarters, the hiring and leasing plans of their tenants will be more clear and hence maybe by Oct 2021, we will get a view on the payout we can expect from EOPREIT this year.

The book value of EOPREIT is at Rs. 285.82/- per unit; the net asset value per unit is Rs. 387.54/- as on 31 Mar 2021 and the current market price of EOPREIT is at Rs.313.51/- (NSE as on 7 May 2021). Looking back, the  EOPREIT’s IPO was in March 2019, listing price per unit was Rs. 300/-.

Two questions people have foremost in their mind is

[1] Is EOPREIT good to buy assuming that going forward the offices might remain closed for almost a year ?

[2] We are going to to be living with the virus for sometime and every company is talking about Work From Home solutions and hybrid work models. Does this mean a slow death for office REITs?

At the end of the first pandemic year, EOPREIT has 88.9% occupancy and have collected 99.8% of their rentals.

Their occupants are primarily technology companies and global financial majors with captive units in India for back end work. The robust hiring announced by tech and rebound in the US economy has helped boost the sentiments and expansion plans of the tech and financial firms.

Global companies will increasingly prefer the best properties, with high levels of compliance and service and landlords with strong financial and operational qualities. Occupiers are likely to have an increased focus on wellness and enhancement of safety protocols for property management, which will drive demand to EOPREIT’s high-quality portfolio.

Bangalore is EOPREIT’s major hub and it is where the tech companies prefer to set up shop to attract the best talent.

Even though the work from model is in play, going forward, the employers will want the employees back in office. The vaccines will be made available to everyone, it’s only a question of how long will be the waiting period.

Till next post, take care !!

Disclaimer: This is not an investment advice, only an opinion piece. All investments are subject to risk. Please ensure due diligence before making any investment decisions.


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