@Amit2saxena
Thanks for seeking my view. I am curious to see when I agree with your evaluation and financing arrangement to make it name shake distribution accretive. However, there are many moving parts, from interest rate, to lease rental to occupancy levels which can completely change the future distribution. Personally, I do not like Embassy REIT taking development risk with almost 2/3 of area being under construction. I completely agree your view that it is kind of assisting promoter group by acquiring assets at REIT level.
I would like to mention past track record of acquisition of the Embassy REIT of Tech Village in Nov Dec 2020. Even that time it was promised distribution accretive. However, there are no major improvement despite that project was almost 95%+ occupancy. Enclosing slide of presentation giving management view on same.
The actual distribution was declined first due to dilution and then due to adverse market development resulting from COVID.
Before Tech Village acquisition, distribution Rs 5.5 per unit (Sep 2020 quarter). If we apply 4% accetion, than distrubution shall increased by Re 0.22 per unit, giving approximately Rs 5.72 per unit distibution. However, Distribution never reached Rs 5.7 per unit in any quarter as revelaed from the data.
Personally, I would be happy when March 2020 distribution of Rs 6.89 per unit being crossed. While March 2020 distribution was inflated due to funding of debt by Zero coupon debentures, still almost 4 years are passed, and still Embassy REIT has not crossed it highest distribution. While definitely there were certain development like COVID resulting in lower Office space demand and SEZ tax benefit sunset to increase in interest rate, still my litmus test of successful REIT management would be when they cross their all time high distribution. Unfortunately, management seem to be more concern about growth than distribution, while I personally look as REIT as quasi fixed income assets looking forward to stable income generation.
Disclosure: Embassy REIT has second highest allocation in my fixed income portoflio after Gsec. My understanding may be incorrect. I may invest/divest from Embassy REIT without informing forum. My view may be biased due to my holding. I am not suggesting any investment action to reader. I am not SEBI registered advisor.
Subscribe To Our Free Newsletter |