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Office developer Embassy targets June deal, sources say

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Embassy plans to raise funds via QIP, sources say

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Deal comes amid India real estate boom, surging demand

By M. Sriram

MUMBAI, April 2 (Reuters) - India's largest real estate

investment trust, Embassy Office Parks, plans to raise

up to $400 million from investors, two sources with direct

knowledge said, as it looks to meet demand for office space from

global and local giants.

Embassy, which manages 45 million square feet (4.18 million

square meters) of office parks, has clients including Google

, Cisco ( CSCO ) and IBM ( IBM ) who are bolstering

their presence in the world's fifth biggest economy.

The property group has appointed investment banks Morgan

Stanley ( MS ) and India's Kotak to run the deal, which it

expects to complete by June, said the sources, who did not want

to be named because the talks are private.

The funds raised would be used to repay debt and acquire

land in the southern city of Chennai, where Embassy is looking

to bolster its presence, both sources said.

Commercial real estate is booming in India, with large local

and global companies hiring in record numbers after the COVID-19

pandemic. In 2023, companies in India leased 61.6 million square

feet of office space, and the year's last quarter saw record

quarterly leasing, consultancy firm CBRE said.

That's in contrast with markets such as the U.S., UK and

Australia, where office occupancies have slumped with people

working from home. Although companies in India too have 'hybrid'

working models, many still need more office space to fit new

hires and for back offices, which employ thousands.

Embassy, Asia's biggest office REIT, aims to seek board

approval in coming weeks for the deal, which it plans to carry

out via a Qualified Institutional Placement (QIP), a tool used

by listed Indian companies to raise funds from mutual funds and

other large institutions.

With the boom in Indian office space, the deal is expected

to attract foreign asset managers and mutual funds, said one of

the sources with direct knowledge.

Embassy and the banks did not respond to queries seeking

comment.

With properties in four cities - Pune, Mumbai, Bengaluru and

the National Capital Region - Embassy has 245 occupants, mainly

from the technology and financial services sectors. A large

portion of those occupants are Fortune 500 companies.

Private equity giant Blackstone, which used to own a

controlling stake in Embassy, sold that down in recent years,

fully exiting the company last year.

Embassy's units have risen 17% the past year, more than

India's two other listed REITs, but less than the broader NIFTY

Realty index which has more than doubled in the same period.

While Embassy focuses on offices, India's broader real

estate space, including residential and warehousing is seeing

growing interest from investors as demand and prices skyrocket.

For the December quarter, Embassy's post-tax profit rose 6%

to 2.3 billion rupees ($27.58 million) while its total income

grew 5.3% to 9.8 billion rupees.

($1 = 83.3600 Indian rupees)