Embassy Office Parks REIT Conference Calls and Earnings Call Transcripts

Conference Call between Management and Analysts on Q1FY21 Earnings Performance and Outlook. Click to read the full pdf. 

Key Highlights

Joining me on the call today are Michael Holland, the CEO, Vikaash Khdloya, the Deputy CEO and COO, and Aravind Maiya, our CFO. Mike will start off with the first quarter highlights, business overview and strategy followed by Vikaash and Aravind. We will then open the floor to questions.

Over to you, Mike.

Mike Holland

Today we announced our first quarter FY2021 results. You will recollect that the nationwide lockdown in India commenced on 24th March and it has now been recognized as one of the world’s most stringent lockdowns. Despite the unprecedented challenges, and thanks to the resilience of our business and efforts of our management team, we have successfully navigated our business through the quarter, maintained a healthy 92.2% occupancy, collected a robust 98.9% of rentals, and the Board have earlier today approved our Q1 distributions of Rs 4,499 million.

This clearly demonstrates the strong fundamentals of our business and underpins our ongoing commitment to continue to deliver value to our unitholders, including through our regular quarterly distributions. This quarter began during the early stages of the COVID-19 pandemic for our markets in India. We set clear priorities for our business to navigate successfully through the multiple challenges brought by the pandemic. These priorities included: ensuring the health, safety, and well-being of all our stakeholders, facilitating business continuity for our occupiers, and delivering on our rental collections and quarterly distributions. We are on track on all of these priorities. Our parks and buildings were open and operational throughout the quarter within the guidelines laid out by the government.

This has been delivered through the seamless pan-India execution efforts by our on-ground teams. Given that India’s COVID-19 status is behind the European and US timelines and many of our occupiers are following protocols defined by their global headquarters, employee ramp up is expected to remain slow and cautious. We continue to be actively engaged with our occupiers in each city, every week, supporting their return to workplace and ramp-up plans. There has been much discussion on emerging trends affecting the dynamics of commercial office industry globally. While the impact of the pandemic still continues to evolve, through our conversations with a number of major occupiers, these inputs over the last quarter have reinforced the initial assessments which we articulated in our previous call.

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Earnings Call Transcript for Embassy Office Parks REIT Q4FY20 earnings performance and outlook. 

Michael Holland Chief Executive Officer (CEO), Embassy REIT

These are challenging times across the world and wherever you are, we sincerely hope that you, your family and colleagues are healthy and safe.

Today we announced our fourth quarter and full year FY20 results – in a world which is exhibiting unprecedented uncertainty, we are pleased to report a great outcome for FY20, a Q4 distribution of Rs.5,317 million, that’s a total distribution for FY20 of Rs.18,821 million, ahead of our revised guidance last quarter, and an NOI growth of 15% YOY, all demonstrating the resilience of our business despite COVID related disruptions in March 2020.

Our core business proposition of predictable, low volatility cash flows and quarterly distributions has delivered in FY20 what we said at the beginning of the year - a record 2.4 msf new leases, 15% YOY growth in NOI, early delivery and healthy pre-commitments on our 1.4 msf on-campus development, culminating in the strong distributions for our Unitholders. Notwithstanding this strong set of results for FY20, our full focus now is on our business today and the year ahead given the difficult external environment which has enveloped global and Indian markets since the COVID outbreak. In India, COVID-19 started to emerge as a potentially significant business disruptor in late February.

We entered this crisis in a position of great strength, the result of a number of years of prudent and proactive management of the business. Our strong balance sheet, ample liquidity, the long term lease contracts with our 160+ corporate office occupiers, the strong relationships and trust we have built with them over the years and our first class on-ground operations teams across the country all contribute to the resilience of our platform, and surely that resilience will be required over the coming year. Since the outbreak and subsequent lock-down by government, our focus has been to facilitate business continuity for our occupiers operating critical services from our parks and ensuring the health, safety, and well-being of all our stakeholders.

Our parks remained open for business to support core business functions of our occupiers throughout the national lockdown within the parameters laid out by the Central Government and the multiple States in which we operate. The many accolades from our occupiers reflect the hard work and unwavering commitment of our on-ground teams. We acknowledge and sincerely thank all of our front-line employees and service providers for their efforts to date.

We are in very early stages of this global business disruption and there is a great deal of uncertainty, many views and speculative comments about potential impact of issues such as social distancing, work from home, workplace de-densification, business travel reductions, liquidity squeeze, and so on. In addition, we’re still operating in a restricted environment even today, and it is difficult to estimate with a reasonable level of certainty as to how long the current challenges will persist.

However, amid this uncertainty, we have a positive view on a number of areas: Firstly, it is clear that a significant reduction in the densities of the workplace is coming, given increased priority to employee wellness, and this will drive demand. Some of this de-densification, but certainly not all, will be offset by more flexible workstyles including work from home. The work from home experiment in India has delivered in this crisis but my recent interactions with many corporate occupiers leads us to a preliminary assessment that while the industry may see more flexibility in employee workstyles, the total business environment which Embassy REIT provides to its occupiers and their employees cannot, in India, be fully replaced by solitary work from home changes. One business leader from a global corporation explained to me that, for his people, a young demographic of digital/tech experts serving cloud, cyber security and data needs of western corporations, the “office is their home”.

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