Corporate Reports Business u the magazine of the corporate world photos: s photos: director, South, jll India, which was mandated for the deal. “It’s a collaborative approach of building a n A ‘real’ player jay b the campus where the lesser and the lessee would come together and put or on their thinking caps to build the a de right campus with the right solutions for themselves. In fact, Embassy is also providing incubation space for its tenant.” Currently, Embassy, a pioneer in the leasing model of commercial space and development of integrated office parks, enjoys a strong cli- ent portfolio of over 100 m n c s and blue chip (around 15 Fortune 500 companies), employing 160,000- odd people across these business parks. These include big names like ibm, Microsoft, Fidelity, Cogni- zant, c i s c o, Yahoo, Goldman Sachs, Accenture, tc s, Mer- cedes-Benz, a n z , Virwani: ‘major and Vodafone. corporate entity’ Despite sluggish mar- ket conditions, in 2014 the company leased out 5.6 mil- lion sq ft of office space out of the total office space absorp- tion of around 10 million sq ft in the whole of market. It added Embassy creates the largest portfolio of income- 27 new clients (from diverse fields) yielding assets including Lowe’s, Rolls Royce, o l a Cabs, Volkswagen and Rockwell. This year, till March 2015, the company ast year, when the Embassy million sq ft in this newly acquired has leased out 530,000 sq ft of space group, in partnership with pe office space – named Embassy Tech- to 11 tenants, which include Seagate Lplayer Blackstone, acquired a Village, where Flipkart has already (124,000 sq ft), Mercedes (74,000 sq 106-acre business park on the Outer inked the largest office lease deal in ft) and Quest (60,000 sq ft). While it Ring Road of Bangalore, in one of the country for a period of 10 years. enjoys an average occupancy rate of the largest commercial real estate The e-commerce major has signed 96 per cent across its parks, the com- deals worth `1,200 crore, the Banga- up to lease two million sq ft commer- pany annually earns around `850 lore-based realtor managed to edge cial space from the Embassy group at crore from its rental portfolio at an out d l f as the country’s largest com- an annual rental of about `180 crore, average rental of about `48 per sq ft mercial office space developer. The which translates into about `52 per per month. acquisition has taken the company’s sq ft – a rental that’s in line with “Our association with Embassy total commercial real estate holding prevailing market trends. Embassy group commenced with our Infan- to about 30 million sq ft, as against will develop a modern ‘plug and try Road office,” says Prasanna d l f ’s 27.50 million sq ft. play’ facility for Flipkart in a phased Gonuguntla, vice-president, prod- With this acquisition, Embassy manner in the next three years. The uct development, Mercedes-Benz Office Parks (e o p), the 50:50 joint ven- country’s largest e-tailer, which has Research and Development India. ture between the Embassy Property formulated a mega expansion plan, “While working on our new facil- Developments Pvt Ltd (e p d l), a hold- will shift its operations from multi- ity, Embassy Crest, we experienced ing company of the group, and the ple locations to this campus which the same quality standards of pro- pe giant, now boasts a strong portfo- will accommodate its 20,000-odd fessional knowhow, diligence, flexi- lio of four office parks spread across employees. bility and support from the Embassy Bangalore and . It plans to build “Embassy will be building a classic group as was expected of them. This another 13-14 million sq ft over the design-built campus for Flipkart,” is why, we were able to complete a next three-four years, including eight says Juggy Marwaha, managing Daimler standard building on time,

u 50 u MAY 25-June 7, 2015 Business India u the magazine of the corporate world Corporate Reports even when faced with many tech- nical and structural challenges and working under stringent timelines.” Adds Narayan Ramalingam, man- aging director, Lowe’s India: “Our entry into Bangalore was an impor- tant step towards ensuring Lowe’s is well-positioned for the future. Building a world class g i c , focussed on technology and analytics, will help Lowe’s further its transforma- tion to an omni-channel retailer and provide customers with more personalised shopping experiences. Establishing our campus in Embassy provides access to the strong and growing talent base available in Ban- galore. Embassy has been good to Holland: ‘full faith’ work with throughout the process. They’ve been committed to learning and understanding our needs and and Century Real Estate Holdings – decisions for overall value creation for helped bring the project to fruition.” both of whom were jointly develop- the stakeholders. That we have made As a group, Embassy has a total ing the CityView project. Shapoorji multiple investments in other assets portfolio of 37 million sq ft of devel- had claimed that the promoters had of Embassy group demonstrates how opment (completed), which also abandoned the project and hadn’t our partnership has progressed since include six million sq ft of pre- cleared dues amounting to `82 crore. our first investment in Embassy Man- mium residential development. The Bollywood’s leading actress Deepika yata Business Park in September of company has a minor exposure in Padukone, along with some Infosys 2011. There is great collaboration and retail and hospitality too, where it co-founders, was among the first to immense respect among both teams has launched the 247-key Hilton invest in this Four Seasons branded which helps business grow rapidly, Hotel last year at its centrally-located residences that carried a price tag of thereby greatly enhancing value,” Embassy GolfLink Park in Bangalore. over $1 million. says Tuhin Parikh, senior managing Moreover, the developer has added a Embassy currently boasts a robust director, Blackstone. 240-key Four Seasons Hotel in North construction pipeline of 13 million “Our partners, particularly Black- Bangalore (under construction, to sq ft, comprising three million sq stone and h d f c , have added huge be ready by 2017-18) by acquiring ft of commercial space and around value to our overall business,” says a one-million sq ft lifestyle project, nine million sq ft of residential space Jitu Virwani, 49, chairman & man- designed in a mixed-use format. The also. The group, which boasts a his- aging director, Embassy group. “In company, along with Blackstone in toric land parcel of about 1,700 acres, addition to meeting our funding their second deal last year, acquired registered a consolidated turnover requirements, they have played a big the 73 per cent stake held in the Cit- of `1,357 crore in 2014-15; `1,822 role in our overall progression. Their yView project by Goldman Sachs’ crore in 2013-14 and `1,029 crore expertise and governance related Whitehall Fund and the remain- in 2012-13. In the last three years, acumen have helped us immensely ing by Dayanand Pai’s Century Real ever since Blackstone invested $200 in evolving as a major corporate Estate Holdings. million in the group to form a 50:50 entity.” Virwani believes that land The project, valued at `605 crore, joint venture e o p, there has been a talks to him and he could make has a debt component of about `275 visible traction in terms of its com- out just by seeing any land parcel crore, owed to a consortium led by mercial portfolio. Currently, the US- whether that piece would work out State . Apart from the based pe giant has a total exposure of for him or not and it was this pas- hotel property, the project comprises about $500 million in various proj- sion that saw him aggregating a land 110 branded residences, 150,000 sqft ects by the Embassy group. parcel of about 1,000 acres in North of office space and 60,000 sq ft of “At Blackstone, our investment Bangalore near the new airport. Even retail space. approach has always been to partner before the new airport was concep- with fundamentally great businesses, tualised, he had started purchasing Robust pipeline managed by experienced and passion- land pieces in that area. Today, he is Embassy stepped in to buy this ate promoters. In Embassy, we found sitting pretty on a goldmine worth project after construction giant a partner, who is willing to embrace thousands of crores of rupees. Shapoorji Pallonji threatened to take challenges and newer ideas, keep In fact, Virwani has real estate in legal action against Goldman Sachs striving for excellence and take joint his blood. His father, Mohan Virwani,

u 51 u MAY 25-June 7, 2015 Corporate Reports Business India u the magazine of the corporate world

development of the park to the full- est extent, with an exposure to the tune of about `540 crore. Currently, the country’s largest mortgage player has a total exposure of about `3,500 crore (a mix of debt, and equity from its domestic & offshore funds) to the group. Gopinath, who has been with the company for over two decades now, narrates one interesting moment when Parekh jokingly asked Virwani (when he was leaving his office, after getting approval for his loan): “So, when are you buying your S Class Merc?” Though, at that moment, Vir- wani didn’t say anything, he decided Gopinath:‘diversified offerings’ never to buy a Mercedes and has still kept his promise. “Those words still play in my mind. It was much more 81, (not pursing any business inter- was gradually on the recovery path than buying a Merc. What Parekh ests at present) was a small-time con- and Bangalore had started emerg- meant was that how I used the bor- tractor/developer in Bangalore and ing as a preferred it destination for rowed money. His advice and sug- he started going to his father’s con- m n c s. This was the time when he was gestions have played a big role in struction sites even when he was in approached by ibm, which wanted to shaping up my businesses and goals,” college in 1982. Despite his father’s lease 200,000 sq ft of office space in says Virwani, who is also a dedicated opposition, he would keep visit- its Embassy GolfLink Park. Though equestrian and owns and main- ing the sites and enjoy knowing the he had a client, he didn’t have the tains a state-of-the-art international nuances of real estate. Finally, he was capital to build the space. Most of the riding academy in Bangalore. The put on the cumbersome job of get- banks they approached, didn’t show school provides training in eques- ting approvals from various civic and favourable response. trian sports and boasts of a high- government agencies and that honed ly-accomplished team. He has three his ability further. Game changer sons and a daughter. His elder son In 1992, the Virwanis started a At about that time, h d f c , which Karan, 23, has just joined his busi- full-fledged partnership firm, Vir- already had a minor debt exposure ness after completing his Bachelors wani Builders, which put up its first of around `5 crore to the company, in Business Administered from Uni- commercial/office development – came to its rescue and that proved to versity of Kent, while others are still Embassy Point at Infantry Road in be a game changer for the company, pursuing their studies. Bangalore. The office building still which never looked back thereafter. The next decade or so was quite hosts the company’s registered office. Virwani and his c fo, Gopinath A.T. eventful for the group when it started This was followed by few more office met h d f c chairman Deepak Parekh building up its portfolio of commer- developments including Embassy in his Mumbai office and put up their cial/office and residential space. By Square, another prominent office case. Parekh was convinced by their 2010, about 70 per cent of its busi- building at Infantry Road. With office park concept, even as ibm had ness was coming from office parks. these developments, the Virwanis already given its letter of intent and, For further expansion, the com- inscribed their name as a top office as against the loan requirement of pany decided to raise `2,400 crore space developer in Bangalore. `25 crore, sanctioned `30 crore. He from the capital markets. But, due to By the late 1990s, the real estate also left instructions that at no point unfavourable market conditions in market started showing signs of a in time should the construction of 2010-11, it had to abandon its plan slow-down and that took its toll on this project suffer due to a funding and look for other avenues. That was the Virwanis also. There was a severe issue. “We have a long association when Blackstone stepped in. The cash crunch situation, followed by with the Embassy group. We have pe player, who had been conserva- family dispute. In 1999, his father been funding them for quite some tive in its approach to the Indian and the younger brother (he is cur- time now. They have created a good real estate so far, found the market rently pursuing his own real estate implementation team. Their quality quite lucrative due to realistic valua- business in Bangalore) separated from of construction and speed of delivery tion. The market, on the other hand, the business. It was a tough period for is quite superior. They have always was looking for liquidity. Adopting a Virwani who, however, accepted this tried to live up to their promises,” safer approach, Blackstone decided as a challenge. By 2002, the market says Parekh. h d f c got involved in the to invest in income-generating, low-

u 52 u MAY 25-June 7, 2015 Business India u the magazine of the corporate world Corporate Reports risk assets and found a right partner in the Embassy group, which already Lala: ‘client servicing critical’ had in excess of 10 million sq ft of office space, generating rental income in excess of about `500 crore. In 2012, Blackstone brought in $200 million to form a 50:50 jv – Embassy Office Park (e o p) – with Embassy group. This e o p currently owns and maintains four office parks, including one it sez in Pune, which the pe major acquired in December 2011 from the d l f -Hub- town joint venture for `810 crore. Named Embassy TechZone, the it park, spread over an area of 68 acres, is located at Hinjewadi in Pune. With three million sq ft of potential devel- opment, the park (one of Pune’s early it parks), boasts of 13 clients includ- ing ibm, Flextronics, at o s and Sie- Awaaz Awards. taking position and existing ones are mens, over a leased area of some 1.8 The e o p ’s fourth office park, expanding their base. million sq ft, which has about 80 per Embassy TechVillage, is strategically The country’s it capital is expected cent occupancy. located in the heart of Bangalore’s it to see a total supply of 12.98 mil- Embassy GolfLinks, strategically corridor and is well-connected with lion sq ft this year (a fourth of total located off the Intermediate Ring the it hubs of Whitefield and Elec- supply in seven major cities), com- Road in Bangalore, is the first office tronic City, as well as all other parts ing from players like Embassy, r m z park by the group. Spread across 65 of the city, including easy access to Corp, Brigade, Prestige and others. acres of primes land, this fully-de- city’s central business district (c bd). “Despite the overall slowdown, Ban- veloped park hosts 20 tenants over Recently acquired, the 106-acre galore as a market has been the larg- 2.7 million sq ft of office space. development is planned as an inte- est occupier of office space in the last With clients like ibm India, Gold- grated project with commercial, few years. Most importantly, the mar- man Sachs, 24x7 Customer, NetApp retail and residential components. ket has been quite steady in terms of India and almost 100 per cent occu- It has a total potential built-up-of- demand and supply dynamics as also pancy, it is also home to Bangalore’s fice area in excess of 10 million sq rental growth, and going forward as first Hilton Hotel. The company is ft, with 1.9 million sq ft already well, it would maintain its momen- also planning to build two more completed. With about 82 per cent tum,” says Ram Chandnani, man- hotels (400 keys), both of which will occupancy, it is already home to 16 aging director, transaction services, be part of its e o p parks. tenants, including, Cisco, o p i , Nokia, c br e South Asia. Sony and Ness. Apart from its office parks, the Improving scenario “We have a strong relationship company’s portfolio includes resi- Planned as an integrated facility with with our customers who have shown dential projects, where it is under- commercial, residential, hospitality full faith in our ability and, hence, we taking nine million sq ft of premium and retail components, its Embassy have always been able to lease much residential space across five projects Manyata Business Park is located on before we deliver the space. The recent in Bangalore and one in . 110 acres of land in North Bangalore. deal with Flipkart is a case in point,” As part of its residential offering, it With a potential built-up area of 18.5 says Michael Holland, c e o, Embassy is putting up Embassy Grove. Spread million sq ft, of which over 10.7 mil- Office Parks. The e o p is aiming to over eight acres of prime land, it is an lion sq ft is currently operational, it take its rental income to about `1,300 exclusive villament complex located is one of India’s largest it-specific crore in the next three-four years, near the Golf Associa- business parks, which offers sez and on the back of the gradually improv- tion’s 18 hole Golf Course. These 106 non-sez options for office occupiers. ing market scenario. As against its lavish, 4-bedroom duplex and tri- It has recorded an impressive repeat existing rental average of about `48 plex units of 4,600-6,000 sq ft comes business from its tenant base (38 ten- per sq ft, the company is currently at a price of `7.2 crore per unit (say, ants, 99 per cent occupancy), which commanding a rental in excess of `15,500 per sq ft). Another 51-acre includes ibm India, Cognizant, Nokia `53 per sq ft for new lease. And, it is residential project, Embassy Boule- Solutions, a n z and Target. The park expected to improve to `60-70 in the vard, just 12 km from the new air- was voted the best commercial proj- next two-three years in a market like port, is a premium gated community, ect in Bangalore at the 2014 c n bc Bangalore, where new corporates are designed by Singapore-based Andy

u 53 u MAY 25-June 7, 2015 Corporate Reports Business India u the magazine of the corporate world

Fisher Workshop. A serene enclave of our expertise of it parks into our since corporates prefer a complete 170 spacious villas in sizes of 4,000- new venture,” says Virwani. “Any- ecosystem, as compared to stand- 7,400 sq ft is selling at `6.5-11 crore. way, the space of logistics and ware- alone structure. “While our focus is on the com- housing holds immense potential It has also built up a strong cli- mercial segment of the real estate busi- in future and we want to be part of entele of 100-odd corporates, whose ness, we have also tried to keep our that story.” association over the years, has pro- overall offering diversified in order Virwani was all prepared to list the vided the company a much required to emerge as a complete real estate country’s firstR eal Estate Investment credibility in terms of delivery and player,” says Gopinath. “Going for- Trust (reit) on Indian bourses, but services. Going forward, it plans to ward, we would continue to explore has decided to abandon the whole continue to leverage this. That’s the the market with this approach.” process after the Union Budget failed reason it is getting the tenants much While the company is involved to bring in the much-needed clarity before it constructs and delivers in developing projects across vari- on the taxation front. The company the space, adding hugely to its risk ous segments of the real estate value had already hired , mitigating ability. chain, it has put in place an inte- Goldman Sachs and Standard Char- Its presence in the Bangalore mar- grated facility management arm, tered as lead bankers for the issue, ket also plays a big role since this mar- Embassy Services Pvt Ltd, to man- which was aimed at raising about ket has shown steady progress even age its properties measur- during the sluggish mar- ing over 20 million sq ft ket condition in the past. of space across it parks, Though rental values have commercial and residen- moved slowly over the tial spaces. Operating last three years, the same since 1993, the company, is expected to see some backed by a team of 100 real growth in the wake core employees and about of improving demand, 3,000 outsourced peo- which will help the com- ple, provides a wide range pany expand its top line. of services ranging from Apart from commercial housekeeping, engineering space, the company also and security to transport has a presence in the res- and landscaping. “Besides idential segment, which development, how we serve helps it diversify its over- our clients – that too, on a all portfolio, along with a consistent manner – over little component of retail a longer period, is some- and hospitality. Now, the thing quite critical for our company is also intending business. It is our services that play `5,000 crore. Experts believe that, to replicate its successful model into a big role in developing a long-term with a strong portfolio of income- its new venture in the field of logis- relationship with our big basket of generating assets, Embassy is the tics. However, it remains to be seen clients,” says Pradeep Nenumal Lala, most suitable candidate for introduc- how it fares in this relatively new c e o, Embassy Services. ing instrument like reit in the Indian segment of business. The group is planning to execute market, as and when the government As an entity, the group has been its existing pipeline of projects which addresses the issue of taxation. quite innovative and shown quite a will continue to revolve around com- progressive approach in the business mercial office space, even as there is Next phase of growth of real estate. While many of its peers also a move to strengthen the res- With all these developments in in the industry have shown reluc- idential offering. The company is pace, Embassy is all set to enter into tance in joining hands with pe play- launching a 300-acre integrated its next phase of growth. Over the ers and some haven’t have that good township project in north Bangalore. last few years, ever since it joined experiences, the company has set an Besides, it has already planned a 200- hands with Blackstone, the com- example by creating one of the most acre Embassy Knowledge Park proj- pany has witnessed remarkable trac- prolific partnerships in the industry. ect in its land parcel located near the tion in its portfolio of office space. It Having created the strongest portfo- new airport. In a significant develop- has already surpassed country’s larg- lio of income-generating assets, the ment, the group is also entering into est player d l f and hopes to continue company is also well placed to mon- the warehousing and logistics space. to sustain its momentum going for- etise the same for future expansion It has already formed a joint ven- ward as well in the backdrop of its programmes and prepared to start its ture with Maini group and is looking robust pipeline of developments. journey of second phase of growth. to put up a logistic park somewhere The company’s office park model has u ARBIND GUPTA near Bangalore. “We want to leverage given it a distinct edge over its peers [email protected]

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