Following the recent Insurance Regulatory and Development Authority of India (IRDAI) approval permitting insurance companies to invest in REIT debt, the first-ever bond raise by an Indian REIT with participation from the domestic insurance sector.
This is the first-time participation from insurers in REIT debt, with a prominent life insurer anchoring the issuance, with over 3x subscription.
The money having a tenure of 5 years as opposed to 3 years raised by the firm will be used to refinance existing debt and complete the build suite project for JP Morgan totalling to 1.1 mn sft in Bangalore in Embassy Tech Village business park.
“This marks an important milestone in Embassy REIT’s ongoing efforts to diversify our debt investor base and also continues the trend of reduction in our cost of debt. Further, this successful placement reiterates investor confidence in the long-term growth story of Embassy REIT and is the first of a number of refinance packages planned for this year,” said Aravind Maiya, Chief Financial Officer of Embassy REIT.
In March, the IRDAI allowed insurers to invest in debt securities issued by infrastructure investment trusts (InvITs) and real estate investment trusts (Reits). This is expected to improve the overall yield of portfolios held by insurance companies while providing more long-term funding to the real estate sector.
As per Irdai’s regulations, 75% of the insurance companies’ investments has to be in AAA-rated assets, 25% can go to AA or even ‘A-‘rated instruments.
Morgan Stanley and HSBC served as arrangers on the private placement and Talwar Thakore and Associates served as the legal counsel on the transaction.
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Embassy Office Parks REIT leased 545,000 sq ft of office space across nine deals and collected over 99% of office rental on 32.3 million sq ft operating portfolio as on June 2021.
Embassy REIT achieved stable portfolio occupancy of 89% with rent increases of 13% on 2.2 million sq ft as of Q1 of FY22. The firm has ongoing construction on 5.7 million sq ft of development projects.
The firm has maintained liquidity of Rs 1,500 crore and Rs 12,100-crore debt headroom to finance growth opportunities.
Embassy REIT owns and operates a 42.4 million sft portfolio of eight infrastructure-like office parks and four city-centre office buildings across Bangalore, Mumbai, Pune, and the National Capital Region (“NCR”). Embassy REIT’s portfolio comprises 32.3 million sft completed operating area.
