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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