CMP: ₹716.75
Embassy Workplace Parks REIT (Embassy REIT) clocked Q1-FY25 NOI of ₹770 crore (down marginally q-o-q) and NDCF of ₹530 crore with distribution of ₹5.6/unit. Total portfolio occupancy as of Jun’24 remained flat q-o-q at 85 per cent, together with infusion of 1.4msf Splendid Techzone, Chennai asset of 1.4msf from June 1.
Pushed by a mix of filling up of SEZ emptiness and pre-leased property, we estimate portfolio occupancy of over 90 per cent by FY26, leading to FY25 DPU of ₹22.5/unit vs ₹21.3/unit in FY24 with FY26 DPU of ₹26.9/unit. The REIT supervisor has given FY25 steerage for five.6msf of complete leasing in FY25 and expects 10 per cent NOI and seven per cent DPU progress in FY25.
In contrast to property in infrastructure trusts like toll/annuity roads or energy transmission property which have a hard and fast tenure of operations, the underlying property in REITs which include places of work, malls and accommodations are perpetual in nature and carry a component of capital appreciation as nicely by means of escalation in leases, addition of latest property and ramp-up in occupancies. Therefore, the whole return supplied by a REIT needs to be measured as a mixture of annual distributions and capital appreciation of the models of the REIT
We retain Add with a revised TP of ₹415/unit (earlier ₹402)..
Key dangers: Slower restoration in leasing and better portfolio emptiness ranges.
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