Following the recent approval by the Insurance Regulatory and Development Authority of India (IRDAI) allowing insurance companies to invest in REIT debt, the first ever bond raising by an Indian REIT with the participation of the domestic insurance.
This is the first exposure of insurers to REIT debt, with a leading life insurer anchoring the issue, with more than 3x underwriting.
The money having a term of 5 years instead of the 3 years raised by the company will be used to refinance existing debt and complete the construction suite project for JP Morgan totaling 1.1 million square feet in Bangalore in the park business Embassy Tech Village.
“This marks an important step in Embassy REIT’s ongoing efforts to diversify our debt investor base and also continues the trend of lowering our cost of debt. Additionally, this successful placement reiterates investors’ confidence in the long-term growth of Embassy REIT and is the first of a number of refinancing plans planned for this year,” said Aravind Maiya, Chief Financial Officer of Embassy. REIT.
In March, the IRDAI authorized insurers to invest in debt securities issued by infrastructure investment companies (InvIT) and real estate investment companies (Reits). This should improve the overall return of portfolios held by insurance companies while providing longer-term funding to the real estate industry.
As per Irdai regulations, 75% of insurance company investments must be in AAA rated assets, 25% can go in AA or even ‘A-‘ rated instruments.
Morgan Stanley and HSBC served as arrangers on the private placement and Talwar Thakore and Associates served as legal counsel on the transaction.
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Embassy Office Parks REIT has leased 545,000 square feet of office space in nine transactions and collected over 99% of office leases across an operating portfolio of 32.3 million square feet in June 2021 .
Embassy REIT achieved stable portfolio occupancy of 89% with rent increases of 13% on 2.2 million square feet in the first quarter of FY22. The company has ongoing construction over 5.7 million square feet of development projects.
The company has maintained cash of Rs 1,500 crore and a line of credit of Rs 12,100 crore to fund growth opportunities.
Embassy REIT owns and operates a 42.4 million square foot portfolio consisting of eight infrastructure-type office parks and four downtown office buildings in Bangalore, Mumbai, Pune and the National Capital Region (“NCR “). The Embassy REIT portfolio includes 32.3 million square feet of completed operating space.