Embassy Off.REIT

Embassy REIT reported a strong Q3 FY26, achieving double-digit YoY growth across key financial metrics. Revenue increased by 17% to ₹1,193 crores, and Net Operating Income (NOI) grew by 19% to ₹985 crores. Distributions Per Unit (DPU) also saw a 10% YoY increase, reaching ₹6.47 per unit for the quarter. The hotel segment contributed to this growth with a 13% YoY increase in NOI, driven by a 100 bps occupancy uptick to 60% and an 11% ADR growth.

The Indian office market experienced a record calendar year 2025, with gross absorption of 80 msf and net absorption of 51 msf, up 8% and 14% YoY respectively. This demand was primarily driven by GCCs and flex operators, contributing 60% of total leasing. Bangalore maintained its lead with a 27% market share. Vacancies are tightening, leading to market rent growth of 9% YoY across the portfolio, with Mumbai seeing 19% growth, Noida 16%, and Bangalore 7%. The total Mark-to-Market (MTM) potential for the portfolio has increased to 11%, a 600 bps jump in just three months.

Embassy REIT leased 1.1 msf across 22 deals in Q3, bringing the total YTD leasing to 4.6 msf. New leases signed in Q3 amounted to 0.8 msf, achieving a strong 17% re-leasing spread, which represents a 5% premium to market rents. The core Bangalore portfolio accounted for over two-thirds of the total leasing, with three out of five properties in the city now 100% occupied. Overall portfolio occupancy stood at 90% by area and 94% by value, with three out of five cities exceeding 95% occupancy.

The REIT launched its third redevelopment project at Embassy Manyata, aiming to increase the leasable area of the E1 block from 0.2 msf to 0.8 msf with a 23% yield on cost. The total development pipeline now stands at 7.6 msf, representing a 19% organic area expansion with a total capital outlay of ₹4,000 crores, projected to add approximately ₹740 crores in stabilized NOI by FY2030. Additionally, a 0.4 msf fully leased new office tower in Chennai (Block 10) received its occupancy certificate, and another 0.6 msf (Block 4) is expected by month-end.

Embassy REIT announced the acquisition of Pinehurst, a fully leased 0.3 msf office building, for ₹852 crores, implying a ~7.9% NOI yield, consolidating its ownership in Embassy GolfLinks. The REIT also received an invitation to offer for Embassy Zenith, a 0.4 msf office tower in central Bangalore, which is fully leased to a major tech company. In a move to recycle capital, the REIT divested 376k sf of two strata-owned blocks in Embassy Manyata for ₹530 crores.

The REIT successfully raised ₹400 crores through a commercial paper at an effective rate of 6.44% per annum. Net debt stood at ₹20,631 crores as of December 2025, with a 32% leverage ratio and an average in-place interest rate of 7.29%. The in-place debt cost was reduced by 61 bps over the last nine months. For FY26, the REIT maintains its guidance, expecting NOI in the range of ₹3,589 to ₹3,811 crores (13% YoY growth at mid-point) and DPU between ₹24.50 and ₹26.00 per unit (10% YoY growth at mid-point).

The Pune market is showing early signs of recovery, with approximately 0.5 msf of leases signed across three assets in the last nine months and a pipeline of 400k sf. This positive momentum is attributed to the upcoming operationalization of the metro in Hinjewadi by June 2026 and the significant rent arbitrage between the eastern and western sides of Pune. Current occupancy in Pune is 62%, and management aims to increase this.

Embassy REIT has successfully converted approximately 8.6 msf of SEZ space to non-SEZ. Excluding Parcel 6 at Embassy TechVillage (still under construction), the converted space has an occupancy of 84-85%. Currently, about 3 msf of SEZ space is underway for conversion to non-SEZ through demarcation and denotification routes. This strategic conversion allows for greater flexibility and market potential for these assets.