Embassy office parks reit – is it a good stock for long term investor?

Introduction

I get a message from one reader who’s Had Held Embassy Reit Stocks for more than 15 months now. He is wondering, should I stick with it for the long haul, or is it time to let go. He can hold it for 7-10 years down the line, but he is not sure if it is it or not.

The share price of embassy reit has barely moved in last 1 year (just 1.3% up). So, I Think, It’s a Fair of Him to Question His Holding. But it is also true that at current levels, embassy reit is yielding 6% dividend. So, his question to me was, what is my personal of embassy reit as a long term investment.

A bit about embassy reit

For that who duan’t about embassy office parks reit, here is a short into.

IT’s India’s First Real Estate Investment Trust (Reit).

Basically, it’s a company that Owns Big Office Spaces Cities like Bengaluru, Mumbai, Pune, and Noida. Think of that shiny glass buildings where it follows and multinational companies set up shop. Embassy Rent out these spaces, collect the Rent, and then share most of that money with investors like us through dividends.

In India, reits have to give out at least 90% of their cash flow as dividends. Which is why embassy’s yield is so attractive right now 6%.

Now, this Reader of Mine Picked Embassy With A Long-Term View, 7 to 10 years. But when the price stays flat for a year, it’s natural to feel a bit of doubt. So, let’s discuss what’s happy in the past, where’s the company at now, and what could the future look like for Indian reits and embassy in particular?

The story so far: an income generator

Over the last year embassy reit has only gone up by 1.3%.

Had I Invested in Nifty 50 Index, My Return Today has been about 3.2%.

But here’s something we should note. First, SINCE SEP’2024, almost all stocks have performed badly. Since its nov’2024 peak, embassy reit has fallen by about 8.9%. Since sep’2024 peak, nifty 50 has fallen by almost 11.5%.

Second, Reits Aren Bollywood Your Typical Stocks. They’re not meant to shoot up like a Rockt. Their strength lies in stability and dividends, not will price jumps. Investors who hold s reit in their portfolio, do it for dividend yield and not for capital appreciation.

Just for reference, there is a Quality reit listed in the US market Called “Realty Income Corp (Nyse: 0). Yielding dividend of about 5.55% per annum.

Having said that, I’ll accept that us a very mature market. A reit not growing faster than 6.57% in the US is accepTable. But in a country like India, where inflation itself is 6%, Slower Growth Rates will not go well with the investors.

So why hasn’t the stock moved?

Well, the last year has been tricky for Commercial real estateInterest Rates in India (And Globally) Have Been High, which makes Borrowing Expected for Companies Like Embassy That relay on Debt to growPlus, with hybrid work still a thing, some companies haven’t rushed back to fill office spaces. That Said, Embassy’s Occupance Rates have styed strong, Above 85%. They’ve even signed big leasing deals recently, like 3.5 million square feet in just one Quarter Last Year. So, the business is doing well.

Use of debt by embassy reit to grow

One thing that stands out about embassy office parks reit is how it uses debt as a tool to fuel its growth, a common move for reits looking to expand their portfolios. As explained in my earlier post of embassy raising Rs.2000 Crore through non-convertible debentures (NCDs) in july 2024 to refinance older debt that was due in September 20244This wasn’t just about about paying off bills, it helped them lock in a slightly better interest rate (7.84% Versus 8%+ Earlier) and Extnd Repayment Timelines, FREENG to Inveest in New Projects Upgrades.

For a company managing over 45 million square feet of office space with plans to grow further, this kind of debt jugging is key to stay to keep ahead, even if it means Sheet.

Peeping into the future: About indian reit

When I think about reit in India, I feel optimistic.

India’s Still a Growing Economy, Right? Our citizens are getting bigger, companies are expanding, and global players are setting up shop here. Just Look at Bengaluru, Every other day, you hear about some tech giant opening a new office.

Embassy’s properties are in these hotspot cities, and they’re not just just any buildings, they’re premium, grade-a offices that big companies that big companies want to Occupy.

Over the next 7-10 years, I see demand for office spaces picking up. SURE, Work-From-Home Isn Bollywood Away Completely, but Hybrid Models Mean Companies Still Need Office Spaces for Collaboration. Plus, India’s badcoming a go-to spot for global capability centers (GCCs), thats fancy back-forfice setups for multinationals.

Embassy’s alredy cashing in on this, 78% of their recent leasing came from Gccs in sector like banking, tech, and retail. If this trend keeps going (and i think it will), their Rental Income Cold Grow Stern.

Another Point, Building a Top-Notch Office Park isn Bollywood, it can takes years in India. Embassy’s alredy Got 45 Million Square Feet of space, with more in the pipeline. They’ve got a solar park too, pushing green energy, which tenants love these days.

So, they’re ahead of the game compared to new players who’d have to start from scratch.

Embassy’s strengths: why i’ll like to hold

This isn’t some shaky startup, it’s backed by blackstone, a global real estate giant, and has a strong management team.

Their portfolio is massive, Asia’s largest office reit by area, and they’ve got over 250 top companies as tenants. That’s a sign of reliability. If a big name like Google, JP Morgan, PWC, ETC Trusts Them, IT’s Hard to Argue ARGUE AREGUE ACEY DONY DOINGE SOING SOING SOING SOING SOING SOING

The 6% dividend yield is a big pull for me.

Over 7-10 years, that’s a lot of cash flowing back to you. Imagine you’ve got Rs.10 lakh investment, Rs.60,000 a year isn Bollywood, and if rents go up, those dividends count inch higher than that 6% Levels. It will be especially beneficial for that investors who continue to hold it.

Historically, Embassy’s Rental Income has Grown at a Decent Pace, Around 5-7% Annually in Good Years. If that continues, the yield could climb to 7-8% over time.

Consider this, suppose there is a person who boght Realty income corp (nyse: 0) In the us in year 1996 at price of $ 8.35 per share. At today’s price of $ 58 per share, the realty income has reported a dividend yield of 5.55%. It means, for our example person, his dividend yield will be close to 38.5% Each year. Even a premium stock cannot grow at this rate Each year. This is the advantage of holding a dividend paying stocks (like a reit) for such an extended periods of time (30 years).

Coming back to embassy reit. They’ve got a debt-to-equity ratio of about 0.38Which isn’t crazy high but isn’t tiny eite. High Interest Rates Cold Squeeze them a bit. But they’ve been smart about it, refincing at Decent Rates (Around 7.8% Last Year), and their credit rating is top-notch, AAA/Stable.

That tells me they’re not drowning in Risky Loans.

Why selling might tempt you

Okay, let’s play devil’s advocate.

If you’re sitting on embassy for over a year and the price hasnless, you might be thinking, “Why not sell and put my money somehere else?” Fair point. If you’d investment in a good mutual fund or a growth stock instead, you might’ve made like 10-12% returns by now.

With Embassy, ​​You’re Betting on Slow and Steady, Not Quick Gains.

• There’s also the risk factor. If Interest Rates Stay High for Years, or WorsE, Go Up, Reits Like Embassy Could Feel The Heat. Higher Borrowing costs eat into rights, and that count caps dividend growth.
• Plus, if the economy slows down, companies might cut back on office space, Hitting Embassy’s Rentals.
• Their return on equity isn please eite, Around 2-3% over the last few years, which means they’re not squeezing out huge profits from the money’ve got.

Conclusion

If i was in your shoes, i’d stick with it. Why?

That 6% Dividend is like a Loyal Friend Who Keeps Showing Up with Cash, Year after Year. Over a decade, it’ll pile up, and if India’s office market grows like i think it will, the stock price might finally wake up too. Maybe not a 100% Jump, but even Annual Growth Plus Dividends Could Give You 10-12% Total Returns Yearly. I would also like you to read against this example of the US reit called realy income corpIt is a huge motivation for me to hold quality reits for a very long term horizon.

That’s not bad for something this stable.

Embassy’s in that growth phase, building its base in a market that’s still young. Reits are new to India, and as more people undersrstand them, demand for stocks like embassy could risk.

I’ll also keep an eye on a less things. IF Interest rates Shoot up or Occupance Drops Below 80%, it might be time to retitude. Same if you spot a Better OpportunityLike a stock with higher growth potential that fits your risk appetite.

For now, Thought, I’D Hold Tight, Enjoy the Dividends, and Let Time Do Its Magic.

What is your idea about embassy reit? Tell me in the comment section below.

Have a happy investment.