The Embassy Workplace Parks REIT (Embassy REIT) delivered a resilient Q3FY23 efficiency with same-store workplace portfolio occupancy ranges remaining flattish q-o-q at 88% and web working revenue (NOI) remaining flat q-o-q at Rs 700 crore. The REIT supervisor had given steerage for five.0msf of leasing in FY23 vs. 2.2msf in FY22 and has achieved 9MFY23 leasing of 4.4msf. Whereas headwinds owing to delay in introduction of DESH Invoice (vacant SEZ areas) and slowdown in giant offers owing to international macro situations are near-term demand dampeners, the REIT supervisor stays assured of delivering double digit NOI development in FY24E and past.
The NOI development is predicted to be pushed by lease-up of vacant house (1.3msf of conversion from SEZ to non-SEZ), completions of 6.6msf of latest space over FY23-27E and markup of expiring leases. We retain our BUY score with a revised Mar’23 NAV based mostly goal worth of Rs 425/unit accounting for asset and steadiness sheet changes, larger WACC and capex. Whereas we retain our FY23 distribution/unit (DPU) estimate of `21.6/ unit, we cut back our FY24 and FY25 DPU estimates by 5% and seven% respectively to Rs 23.0/unit and Rs 24.5/unit, respectively. Key dangers are sluggish restoration in leasing and better emptiness ranges.
The REIT noticed total same-store portfolio occupancy remaining flattish q-o-q at 88% with Q3FY23 NOI of Rs 700 crore. For Q3FY23, the REIT supervisor declared an NDCF(web distributable money circulation) of Rs 500 crore and with 9MFY23 DPU of Rs 16.1/unit, the REIT supervisor is on monitor to realize its FY23 DPU steerage of Rs 20.6-22.8/unit vs. Isec estimate of Rs 21.6/unit.
The REIT portfolio has scheduled expiries of three.4msf in FY23, of which the REIT supervisor has renewed 1.8msf in 9MFY23 and expects to resume one other 0.5msf in Q4FY23 with no additional exits). Heading into FY24E, the REIT portfolio has scheduled expiries of 0.9msf of which the REIT supervisor expects to resume a lot of the non-SEZ house of 0.7msf with steadiness SEZ house expiries of 0.2msf anticipated to see some expiry. Whereas delay in introduction of the DESH Invoice has led to continued vacancies in SEZ house and international macro situations anticipated to affect giant house leasing selections as much as Jun’23, as per the REIT supervisor, small and mid-sized enquiries for non-SEZ house continues to be sturdy which is able to drive occupancies going ahead.
The REIT at the moment has 6.6msf of growth pipeline primarily throughout Manyata and Tech Village Bengaluru property anticipated to be accomplished over FY23-27E at a complete price of Rs 30bn (Rs 2,100 crore pending capex as of Dec’22) and should ship incremental NOI of Rs 800 crore. These new property together with MTM (market-to-market) on current leases, could drive long run development.