Embassy Reit, India’s first public listed real estate investment trust, said it has agreed to buy Embassy Tech Village assets from affiliates of sponsors Embassy Group and Blackstone Group Lp and other shareholders for around $1.3 billion.
The acquisition will be subject to unit holders and regulatory approvals.
The buyout comprises 6.1 million sq ft of completed office space, 3.1 million sq ft of under-construction area, and two proposed 518-keys Hilton hotels in the Embassy Tech Village campus. Around 36% of the under-construction space is pre-leased to JP Morgan.
Embassy Reit is exercising its right under the right of first refusal (ROFO) agreement to acquire the asset.
Mike Holland, CEO of Embassy Reit said, “The proposed accretive acquisition of Embassy Tech Village will mark the addition of another trophy asset to our existing office portfolio, while reinforcing our stable cash flows. ETV is a unique large scale business park, in the leading Outer Ring Road sub-market of Bengaluru, with a diversified blue-chip and predominantly multinational occupier base, including JP Morgan, Cisco, Sony and Flipkart.”
Holland added that the acquisition deepens the Reit’s presence in Bengaluru, which remains India’s strongest office market, and significantly enhances our scale and ability to deliver embedded growth.
The asset has been acquired at a 4.6% discount to the average of the two independent valuations.
“We are pleased to deliver on our commitment to support the growth of the REIT platform through the ROFO pipeline. The Embassy Tech Village ROFO reaffirms the commitment we made at the time of the REIT’s listing to provide Embassy REIT with a pipeline of opportunities for completed and rent-yielding assets,” said Jitendra Virwani, chairman of Embassy Group.
“Embassy Group will continue to develop top quality office assets across the country, thereby providing the REIT with a potential pipeline of assets that will help it grow inorganically over the coming years,” Virwani added.
The Reit proposes to fund $1.3 billion acquisition by issuing equity of $812 million through a combination of an institutional placement of $500 million, and by way of a preferential issue of units to third-party selling shareholders of $312 million.
The proposed placement of units is expected to increase the Reit’s public float, enhance its liquidity, and serve as a catalyst for the trust’s potential inclusion into additional benchmark global equity indices.
The Reit also plans to refinance existing Embassy Tech Village’s debt facilities of up to $492 million through a combination of equity and issuance of new coupon bearing debt.