Embassy Office Parks REIT (Embassy REIT) currently has an overall portfolio occupancy of 87 per cent as of December 2024, which includes the addition of the Splendid Techzone asset in Chennai. With plans to fill up SEZ vacancies, ongoing office leasing activities, and pre-leased assets, the portfolio occupancy is expected to surpass 90 per cent by FY26E. The REIT manager has set a target of 6.5 million square feet of total leasing and anticipates a 10 per cent growth in Net Operating Income (NOI) and 7 per cent growth in Distributable Profits (DPU) for FY25.
Despite an increase in interest costs, primarily due to debt refinancing and new property expenses, we maintain our Buy rating with a target price of ₹429 based on a 1x Mar’26E Net Asset Value (NAV). DPU growth may lag behind NOI growth in the near term.
The strong leasing momentum and gradual filling of SEZ vacancies are expected to boost the FY25E DPU to ₹22.5 per unit compared to ₹21.3 per unit in FY24, with a significant increase to ₹26.6 per unit in FY26E. The REIT manager projects a rise in portfolio occupancy to 88 per cent by March 2025 from the current 87 per cent.
Potential risks include a slower leasing recovery and higher vacancy levels in the portfolio.
Published on March 17, 2025.