Embassy Office Parks REIT Ltd. (NSE: EMBASSY) Q4 2025 Earnings Call dated Apr. 29, 2025
Corporate Participants:
Amit Kharche — Head, Corporate Finance
Ritwik Bhattacharjee — Chief Executive Officer, Interim
Abhishek Agrawal — Chief Financial Officer
Amit Shetty — Chief Operating Officer
Analysts:
Puneet Gulati — Analyst
Mohit Agrawal — Analyst
Kunal Tayal — Analyst
Kunal Lakhan — Analyst
Parvez Qazi — Analyst
Pritesh Sheth — Analyst
Presentation:
Operator
Good evening, everyone. A very warm welcome to all for Embassy REIT’s Fourth Quarter FY 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Mr. Amit Anil Kharche, Head of Corporate Finance for Embassy REIT. Sir, you may begin.
Amit Kharche — Head, Corporate Finance
Thank you. Welcome to the fourth quarter and full year FY 2025 earnings call for Embassy REIT. Embassy REIT released its financial results for the quarter and full year-ended 31 March 2025 a short while back. As is our standard practice, we have placed our financial statements, earnings presentation discussing our performance and a supplemental financial and operating data-book in the Investors section of our website at www.embassyofficeparks.com.
As always, we would like to inform you that management may make certain comments on this call that one could deem forward-looking statements. Please be advised that REIT’s actual results may differ from these statements. Embassy REIT does not guarantee these statements or results and is not obliged to update them at any time.
Specifically, any financial guidance and pro-forma information that we will provide on this call are management estimates based on certain assumptions and have not been subjected to any audit review or examination procedures. You are cautioned not to place undue reliance on such information and there can be no assurance that we will be able to achieve the same.
Joining me today are Ritwik Bhattacharjee, our CEO; Abhishek Agrawal, our CFO; and Amit Shetty, our COO. We’ll start off with the brief remarks on our business and financial performance and then open the floor to the questions.
Over to you, Ritwik.
Ritwik Bhattacharjee — Chief Executive Officer, Interim
Thank you, Amit. Good evening, everyone and thank you for joining us on the call today. It’s been another banner year for Embassy REIT. And it culminates in a celebration of 6 years since our listing on April 1, 2019. Starting with the highlights for the year; we grew FY 2025 distributions by 8% to INR2,181 crores. And with the continued momentum in leasing and with the upcoming deliveries, we’re projecting double-digit growth in distributions for FY 2026.
With 1.6 million square feet of deals signed during Q4, we’ve leased a total of 6.6 million square feet during the year, which exceeds our original leasing guidance of 5.4 million square feet by 22%. This 6.6 million square feet includes 4 million square feet of new leases, 1.6 million square feet of renewals and approximately 1 million square feet of pre-commitments.
We’ve leased over 60% of this area to GCC’s primarily from technology, financials and the engineering and manufacturing sectors. With 11 new GCC entrants this year, we now have 97 GCCs in our occupier roster of 272 corporates. Our portfolio occupancy stands at 87% by area and 91% by value; 8 of our 9 properties in Bangalore, Mumbai and Chennai have crossed 90% occupancy levels. At the end of FY ’26, we expect occupancy by area to be 90% to 91%. And excluding Quadron, which does continue to be soft, occupancy by area is expected to be 93% to 94%.
On the development side, we’ve recently received the occupancy certificate for three towers that totaled 1.4 million square feet in Block 8 at Embassy TechVillage. With this, we’ve delivered a total of 2.5 million square feet in Bangalore during the year. Our development pipeline now totals 6.1 million square feet. Of this, 3.2 million square feet is scheduled for delivery during FY 2026 and is already 68% pre-leased, including expansion options. The 6.1 million square feet of development will cost us INR3,800 crores and result in incremental stabilized NOI of around INR627 crores, which implies an 18% yield on cost.
In other updates, hospitality continues to perform solidly with EBITDA up 25% year-on-year, overall occupancy up 700 basis points to 63% and RevPAR up 26%. In addition to our organic growth plans, we’re also evaluating sponsor and third-party acquisition opportunities to enhance the portfolio. These potential transactions are subject to market and pricing conditions and we will update you as we have more information.
Lastly, there’s a lot of angst regarding the impact of tariffs on the global economy and the overall ramifications of growth. While we’re always cautious, we don’t think the tariffs framework will have a long-term impact on the structural demand for Indian office space. So our thesis in GCC’s continuing to drive demand remains intact. Our conversations with our occupiers and industry experts corroborates our view. In the meantime, we are focused on executing our business, optimizing our cost of capital and ensuring we hit our targets for the coming year.
I will now hand it over to Abhishek to present our financial updates.
Abhishek Agrawal — Chief Financial Officer
Thank you, Ritwik, and good evening, everyone. I’m happy to report that we have met our NOI and DPU guidance for the financial year, with DPU being closer to the higher end of the guidance. We recorded our highest ever annual revenue from operations totaling INR4,039 crores and NOI of INR3,283 crores, both up 10% year-on-year. This increase was driven by robust leasing, contracted rent escalations, delivery of new buildings and assets acquired during the year.
Also, our hospitality business outperformed substantially where we grew our NOI by 25% year-on-year. This was driven by an occupancy uptick of around 700 basis points to 63%, supported by ADR growth of 12% year-on-year. We declared distributions of INR538 crores or INR5.68 per unit for the quarter. This takes our total distributions for FY ’25 to INR23.01 per unit, marking a remarkable 8% growth year-on-year, which is also 1.1% higher than our midpoint DPU guidance.
This DPU growth was driven by the 10% uptick in our NOI as well as positive working capital changes, which was primarily offset by an increase in our interest cost during the year. Moving to updates on our balance sheet. During the quarter, we successfully raised INR425 crores of commercial paper at 7.75%. Further, we successfully refinanced our INR6,300 crores of debt at an average rate of 7.98%.
With this, our net debt book now totals around INR19,650 crores, implying a 32% leverage ratio and a 7.9% average in-place interest rate; 49% of our total debt book is at floating rates and an additional 29% is due for maturity in the next 12 months, which positions us well to take advantage of any rate cuts in the future.
Next, on our portfolio valuation; we achieved a 10% year-on-year increase in our portfolio gross asset value, independently assessed by our valuers at around INR61,200 crores as of 31 March 2025. Our NAV also increased by 5% year-on-year to INR423.22 per unit, primarily driven by strong leasing momentum, growth in market rents and the new buildings delivered in our portfolio.
Lastly, our outlook for FY ’26; we expect our NOI to be in the range of INR3,589 crores to INR3,811 crores and our distributions to be in the range of INR24.5 to INR26 per unit. At midpoint, this guidance implies an NOI growth of 13% and a DPU growth of 10% on a Y-o-Y basis. Our outlook is based on the following key assumptions for the full year. We expect our March ’26 portfolio occupancy to be in the range of 90% to 91% by area, which is 93% to 94% ex-Quadron.
We expect our hotel NOI to increase by around 9% year-on-year on the back of occupancy and ADR growth and expect an improved contribution from our solar portfolio. Finally, we expect a 10% to 12% year-on-year increase in our interest cost, assuming no further changes in the interest rate during the year. The expected increase is mainly due to the impact of new buildings delivered during FY ’25 as well as the planned deliveries for the next year.
With this, let’s now move to question and answer, please.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] We’ll take our first question from the line of Puneet from HSBC. Please go ahead.
Puneet Gulati
Yeah, thank you so much and congratulations on good progress on the DPU growth and leasing. My first question is, if you can give some sense of how our tenants talking about potential impact of tariffs, et cetera, in terms of their growth plans? And how do you think is it likely to impact leasing? You alluded to it a bit, Ritwik, but a bit more color would be very helpful.
Ritwik Bhattacharjee
Okay. What’s your second question, Puneet? Thanks for the compliment for us.
Puneet Gulati
Yeah. So second question is, if you can give more color on what are you seeing for FY ’26 in terms of taxes, change in working capital and the dividend on GolfLink. All these have been quite variable over the past few quarters and potentially impacts dividend. And you’re also talking about a lower DPU growth versus NOI growth in terms of guidance for FY ’26.
Ritwik Bhattacharjee
Okay. Why don’t I take the first question and maybe Amit Shetty can chime in here quickly as well because he has feet on the ground and then Abhishek can help with the second one. Look, the bottom line, I think from a tariff perspective is it really is very early to call, right? I think there’s — number one, I think the administration tends to obviously be a pretty pragmatic deal-making one.
I think you look at the initial level of tariffs that have been put out there. Just globally, I think with the exception of sort of what’s happening in China, everything is sort of hoppy and even China, actually, there’s obviously a lot of deal-making potential.
Now how this actually translates into what it means for India and India’s sort of tariff regime? It’s pretty clear that everything is open for negotiation, but nothing sort of on the services side seems to be impacted as yet. And quite frankly, I don’t think that in our conversations with tenants we are seeing the impact of tariffs as yet or if at all, simply because of a couple of things, right?
Number one is that the work that’s being done here is actually now critical work that can’t be shifted out into America at — for whatever America is proposing, right? I mean if you look at the talent base here, you look at sort of the work that they’re doing across technology.
One of our largest tenants is a global bank, one of the world’s largest banks. They are doing everything across every single part of their ecosystem. This is a bank that invests $15 million to $20 million a year in technology. And they write about it prolifically too, whether it’s AI, whether it’s every single sub-stack across their business architecture.
So that’s not going to suddenly fundamentally go away, particularly against large GCC’s who continue to sort of look at the country very, very favorably, right? I mean we’re not — just not having those kinds of conversations. Could the market potentially change where there might be a slight pause in decision-making? For sure.
But at the same time, the stands under which this entire tariff regime globally could also change, right? They seem to be pulling back a lot. So — but none of that net-net seems to be translating into any major impact for us right now on the ground, which is why I think we feel comfortable keeping the projection thesis and just the macro tailwinds surrounding India’s GCC and commercial leasing story seem very much intact. And we’re seeing this across sectors, right?
We see this across health care. We see this across sort of the pipeline that we’re building. We’re seeing this in the RFPs in the market. So no, I don’t think that that really makes that much — has that much of an impact for now. Amit, I don’t know if you want to add based on what you’re seeing in the market.
Amit Shetty
Absolutely. I think — I mean all the conversations with all our CXOs is just of one nature. They don’t see any impact right now on the tariffs. And having said that, I’d just like to add one point is that the fact of the matter is that there is that much talent only in the U.S. And India happens to be the second largest market for artificial intelligence as well from a talent perspective.
And given that they’re not opening the visas, obviously, the jobs have to move out here. And even if the visas are opened out, the cost at which we are doing the same job is pretty much one-third the cost of doing the same jobs in the U.S. market. So having said this, these two dynamics won’t change. And because of that, we are seeing increase in demand.
Just on the GCC numbers, we have about 1,700 GCC’s, which is forecasted to be about 2,500 GCC’s by 2030. So the demand has just uptick there. And also just to add the CBRE report, which just mentioned that we just closed the year at 74 million square feet absorption across the country, which is now going to go to about — see about 80 million square feet and the year thereafter, 82 million square feet.
Puneet Gulati
Yeah. So just closing here, so none of the RFPs have been retracted and none of the tenants are saying growth plans are likely to be curtailed?
Amit Shetty
Absolutely not, Puneet, absolutely not. Just on the RFP perspective, I just have to give you a statistics quickly; 18 million square feet worth of RFP is there in the market. And the fact of the matter is that we’re just sitting in May, so we’re going to see a lot more action that’s going to come into the market as we grow across. And pretty much significantly, about 12 million square feet of this RFP of the 18 million square feet is in Bangalore, which is where 75% of our asset is sitting.
Ritwik Bhattacharjee
Yeah. So one last point, Puneet, I think we’ve been doing this for 6 years now as a public company. And we’ve seen sort of periods of serious episodic sort of demand waning. This does not look like one of those areas right now for us, because I think we’ve seen that before. So have you take your own questions, please see?
Abhishek Agrawal
So Puneet, on the 4 items that you asked about FY ’26. So the way we model and we would request you to look at it is on a full year basis. And the way we have looked at it is, let’s say, on the tax. So cash tax will remain in the ZIP code of 4% to 5% of revenue. This is what the way we have also modeled.
On the working capital, as we had said earlier also, what will happen is for the next couple of years at least, as we increase the leasing and the occupancy, it will be positive for the full year basis. Quarter-on-quarter, it may be moving, as you rightly said, because of a lot of factors like payment of property tax in a particular quarter, a payment of some vendors. So that may be up or down. But on a year-on-year basis, it will be positive.
You can say if our occupancy goes from 87% to 90%, 91%, which we are guiding, whatever is the net occupancy, you can calculate because the major factor here for working capital is the security deposit receipt.
The third point on GLSP, see, there are three things that we need to look at GLSP, which is dividend, interest payment and the loan repayment. All three taken together for the last year was around INR270 crores. We think that it will be in the similar ZIP code of INR270 crores for the year. It may be different in different quarter based on the cash availability, because for them also, it depends on their cash availability on the working capital. But we expect it to be in the similar ZIP code.
The last item that you asked is why, again, DPU growth is at midpoint lower than the NOI growth at midpoint. The two major reasons which remains the same is one is increase in the interest cost because of all the deliveries that we have done during the current year, which is FY ’25 and all the deliveries, which is 3.2 million square feet of the next year.
But the cash revenue starts with a lag and hence, interest on this will be — and as I said in my prepared remarks that it will be still 11% to 12% higher than current year. So that is one reason for that. And the second reason is as we lease up, there will be some noncash NOI, which will start coming in as we increase the leasing for the next one, two years, this noncash will be there and which is one of the reasons for decrease in this rate also.
Puneet Gulati
Understood. And lastly, you’ve talked about fixed cost debt, which used to be 49% earlier has gone up to 51%. So are you thinking that 7.75% your new commercial paper rate is the best rate you can get in the next foreseeable 6 months in the market?
Abhishek Agrawal
Yeah. So Puneet, on this one, see, the market is very volatile. And as we see that the repo rates have gone down, there were two cuts because of which the interest rates also we are seeing is going down, but it is not going down at the same pace at which the repo rate actually went down. There will be some lag.
What I can tell you is like very recently, as we speak, we have done a CP, which is somewhere around INR650 crores, just north of that at 7.1%. So this is an indicator that the interest rate can quickly go down also. But I would refrain from taking this as a guidance for the full refinance that we will do because the interest rates are a bit volatile. And the banks are — I mean, it’s not coming into reflecting in the MCLR very quickly.
Puneet Gulati
And you have not factored in any interest rate cuts in your guidance?
Abhishek Agrawal
So we have factored the two interest rate cuts, which has already happened, nothing from here, yes.
Puneet Gulati
That’s helpful. And lastly, if you can talk about the NAV growth as well. So NAV grew only 5%. I would presume 5% it should have grown normally itself, right, I mean, just by contractual escalation. Why is the benefit of maybe lower interest costs and higher occupancy not getting factored in?
Abhishek Agrawal
So Puneet, very good question, but I’ll try to answer it this way. One, even though the interest rates are moving down slightly, it doesn’t generally impact the cap rate or the WACC rate so easily, because in India, again, the transactions happen, the cap rate moves in a very, very tight spread. And there’s no change in the cap rates that the valuers have taken.
Secondly, though the GAV has increased, one major reason for that is that we have spent a lot of money on the capitalization. The loans have also increased. And hence, the NAV is increased by 5% only. The NAV will start moving up as we start delivering these assets. So maybe in the next couple of years, you’ll see these moving, but it’s also a factor of where the WACC rate is or where the cap rate is.
Puneet Gulati
But increased occupancy has not been captured fully, you think?
Abhishek Agrawal
Yeah. Also, see, increased occupancy or the rate at which we will increase the occupancy, we’ll be able to lease has been factored in the future cash flow. But you have to also factor two things. One is there was a reduction because of reduction in the JV of Quadron, because of which you can see some impairment that we have taken in the current financial. And also, there was an increase in the tariff of solar last year also and current year also because of which we have taken a reduction in the GAV of the solar park also. Though it is very small as compared to the total, there is a reduction there also.
Puneet Gulati
Okay. That’s helpful. Thank you so much.
Operator
Thank you. [Operator Instructions] Next question is from the line of Mohit Agrawal from IIFL. Please go ahead. Can you please unmute your line and go ahead with your question please?
Mohit Agrawal
Yeah. Sorry. Thanks and congratulations to the team on achieving your guidance again. My first question is on the leasing outlook and your occupancy guidance. So broadly, if I try to do the math, you’re guiding to just under 4 million square feet of new leasing. Is that correct? And if yes, how do you see this number in the context of the overall leasing environment and versus what you have done in the last couple of years?
Ritwik Bhattacharjee
Right. What’s the second question?
Mohit Agrawal
So second question, Ritwik, if you could give some color around, let’s say, when you say that 93%, 94% occupancy ex of Quadron by the end of fiscal ’26, you’ve shown a good growth in occupancy for Manyata and for Oxygen in Noida. Pune has been stagnant or declining. Some color on how do you see each of these three regions, Bangalore, Noida and Pune by the end of FY ’26?
Ritwik Bhattacharjee
Yeah. Okay. Let me start. So look, I think — I mean, I don’t want to get into detailed sort of projections on sort of leasing. But I think you’re broadly right, right? Because if you think about it, we’ve got 5.3 million square feet of vacant area, right, at the end of the day, you think about sort of taking the drag here being roughly sort of Pune, which is around 2.5 million square feet. And even, if you sort of assume whatever projections you want to sort of assume for what you lease up there, that’s obviously been the drag in the portfolio, let’s say, that turns around.
The rest of it effectively is approximately, you’re looking at about 3.5 million to 4 million square feet that’s kind of vacant and which we back ourselves to fully lease up, right? So that’s kind of the baseline. Now there’s clearly sort of some additional stuff that we will be looking to do. And there are clearly numbers that we would focus on. But yes, that’s sort of the area.
We’re only looking at it — the initial numbers that we have the baseline for what we have organically is effectively the vacant area that we have. We’re already putting in the pre-deliveries that are coming in the areas that haven’t been leased up. So — and looking to sort of obviously strip out or maybe put a little bit of a variable assumption on the softer areas. So that’s how we think about it. But I think the broader picture from there from just thinking about what the leasing guidance is. And there will obviously be number one, ranges there will be assumptions around it. And there will be sort of various things that will impact it over the year.
And this leads me to sort of the second question is that at the end of the day, in this whole portfolio, which is 50 million square feet and 40 million completed. I think Bangalore pro forma, which is the largest by the end of ’26, is going to be around 95% okay, by area, occupancy. You’re looking at Mumbai effectively 100% and we don’t have any space to lease over there. And we are also backing ourselves like when you look at something like Noida; at this point in time we were in the 60s sort of a short while ago. We moved into the 80s.
And we think that there’s not much left to really lease in Oxygen. You’re looking at sort of the vacant area of around 600,000 square feet. And we plan to sort of pretty much get most of that leased. So I think Noida we can effectively then also move to sort of the mid-90s level. So that’s sort of like how you think about occupancy ex-Quadron and Pune sort of getting to those 90s levels where the rest of the portfolio is firing on all cylinders, to be frank. And that’s why we feel confident about where the leasing numbers should stack up.
Mohit Agrawal
Sure. So it’s only Pune, which is going to be a drag?
Ritwik Bhattacharjee
Well, yes. And I think, look, we want to be transparent about that. I think — and we always have been. I think who knows? I mean, the metro comes up. You sort of see the fact that, look, this can turn. This can turn pretty quickly. And it just makes sense for us to sort of wait and watch on it. Amit, do you have something to add?
Amit Shetty
Yeah. Honestly, the fact of the matter is that Pune, if you see last year, we did about 1 million square feet of transactions. The market did about 6.4 million square feet. So we did about 10%, 12% despite of the fact that we were on the western side of Pune where all the action was happening on the eastern side. Now having said that, if you see Quadron is the only drag that we have as an asset in Pune. But given ETZ as well as Cube-x, we’ve done absolutely better than average of what the market is doing. So the drag only could be on Quadron, but we are pretty confident about the other two assets.
Ritwik Bhattacharjee
And this is all organic, right? I mean we’re also looking to sort of — we are keeping an eye on what’s happening sort of to add inorganically to this as well. We don’t have an update right now. But that’s also sort of something that we’re thinking through.
Mohit Agrawal
Yeah. And Ritwik, on Quadron itself, it’s been some time that you have been looking at various options. So what’s been the most — like what are the options that you’re looking at? And when can you find some solution to it? Just I’m trying to understand what are the options that you have been presented by various IPCs and all of that?
Ritwik Bhattacharjee
Yeah. Okay. I mean there are two options. One is own it and own the economics and the other is; get rid of it for a price, right? I mean those are the two main things because that clearly is a pretty active and fertile residential market. I think we’ve been talking to people in the market. I think at this point in time, it doesn’t make the economics of monetizing it at other numbers just don’t make sense to us. I think what we’ll do is we’ve had conversations with IPCs. We’ve had conversations with a number of players in the market.
And I think we’re more than — we’re not sort of under heavy pressure to sit here and sell at a price that we don’t want to. So it just behooves us to wait and see and make sure that we can take advantage of market conditions. That being said, if somebody really has capital to deploy, wants to put it to work and takes it and does something else with it, that’s totally fine. We tactically entertain that.
Abhishek Agrawal
And also, the market dynamics might just change given that the metro is just bang opposite the Quadron park. And the station is ready and probably 6 months, a year down the line, the metro might be operational and given the fact that the Navi Mumbai Airport might also be operational shortly. Things might change quickly and look how Noida changed in the last one year. And the same thing might happen with the Quadron, which we are also pretty confident about.
Mohit Agrawal
Great. Thanks. Very helpful. All the best. Thanks all.
Operator
Thank you. We’ll take our next question from the line of Kunal Tayal from Bank of America. Please go ahead.
Kunal Tayal
Great. Thanks. A few questions from my side. The first one on the NOI guidance. So if I just think about the midpoint of 13%, could you sort of lay down what are the big building blocks of this 13% growth? It would seem like 4% to 5% of your annual escalations, maybe another 4%, 5% coming from occupancy and then the rest coming from new development. Does it sound right?
Second, sort of just going back to the topic of the gap between NOI and distribution. On the interest expense, didn’t you say that that will increase 10% to 12%? So it actually sounds lesser increase than NOI. B, within that are you also sort of counting on tailwind from sort of non-cash NOI that you would have had last year, what you’re pointing to as a drag for this year. You should have had a recoup from last year is my guess.
And then the third one is on your exits. That’s sort of been sort of on the higher side of the plan for a few quarters now. Is that mainly still got to do with IT services or Quadron as an asset or is there a third source for it? Thank you.
Ritwik Bhattacharjee
So let me just start just very quickly with the third point on the IT services. Yeah, that’s been the biggest drag. And I think at this point in time, for Quadron in particular, it’s the IT services. It’s always been flagged that they were going to go. And I think that’s been sort of the biggest drag in the leakage. And we haven’t been able to sort of backfill that to be perfectly candid. I’ll let Abhishek sort of handle the NOI building blocks and the rest of the interest expense question.
Abhishek Agrawal
Kunal, on the first point, yes, you are very correct on the NOI 13%. These are the 3 points. There’s one more, which is the MTM, which we will realize on the renewals also because while if you see from the presentation, the MTM looks low. But we are doing single digit, at least higher than the market rentals. So whenever we renew, we are realizing some extra. So that is the fourth one.
On the interest one, yes, I mean, the way we have projected it is that it will be higher 10% to 12% cash interest, which is lower than the NOI increase. But then there is noncash drag also, as you rightly said. What typically happens, Kunal, is that, let’s say, there’s a lease of lock in 5 years, the rent free is only 6 months. So for the first 6 months for first year, the noncash, is bigger. But then it unwinds over the balance 4.5 years. So the recruitment is lower. What gets built up is higher in case you are leasing much in the current financial year. So that is what we will repeat for the next two financial years also.
Kunal Tayal
Got that. Okay. Thank you so much.
Operator
Thank you. We’ll take our next question from the line of Kunal Lakhan from CLSA. Please go ahead.
Kunal Lakhan
Hi, good evening. Just on your commentary on the acquisition side, I just want to understand because we have 40 million square feet completed and then we have 6 million under construction and there’s more than 4 million upcoming. So there’s a fair bit of a pipeline we have, almost like 25% over the current portfolio. Just wanted to understand the need for considering any kind of acquisition?
And also like is it — has it anything to do with like opportunistic or like accretive transactions currently available in the market, which I would presume it could be a little — actually, I presumed that the asset transaction — asset level valuation should be going higher with the kind of — with the expectation of the rate cuts and the kind of revival we are seeing in the industry.
So just wanted to understand your perspective on what’s the need of acquisition at this point in time when, first of all, do we have a fair bit of under construction rollout there and on the market opportunities that are available.
Ritwik Bhattacharjee
Yeah. Okay. So let me take that. The need for the acquisition is sell-side analysts always screaming for growth and pounding us when we don’t give it. That’s just a joke. But if you think about the fact that there’s 10 million square feet, as you point out, I mean, we think about 6.1 million square feet of development. But look, at the end of the day, this portfolio is always like a living, breathing organism, right?
I mean we look at — when we started out, this was 33 million square feet. We’ve added — we are now 50 million. And imagine if we hadn’t added the 17 million square feet we had over the last 6 years, right? I mean, if we hadn’t put ETV in there, I mean, you’ve got to think about this from a dynamic perspective. That if there are opportunities to buy and whether it comes again from a sponsor or a third party.
If it makes sense for the portfolio in a micro market that’s growing and there’s a competitive bid to put people in these spaces. We should have a look at it because it’s just a fiduciary duty to grow this asset base to make sure that it kind of gives you the distribution.
That being said, look, we’re pretty clear. Number one, it has to be — I mean, more than accretive. We’ve got to make sure that we can fund it and put it into the portfolio at the right price and it has to be in a really good market, right, which then gives you the distribution and the distribution growth.
Secondly, you’re right. I mean, we’re in no rush. And I think that’s why there are times we don’t also — we tend not to look at deals. We tend not to — we tend to pass on them and the funding markets are tight. The rates are in a place where it’s going to — there is going to be a drag on accretion, we won’t do it. And plus, the majority of all our development we’re doing is at 18% YOC.
So if you’ve got that internally, you’re right. And why do we have to go out there and look at it? So we don’t at times. But it doesn’t mean we’re never going to sort of be out there having the conversations to grow this because again, it’s not that we get 10 million to 15 million square feet of addition.
We’re not buying super-tanker parks all the time. We can’t. There simply isn’t that kind of supply that transacts that efficiently in the market at this point in time. So I’ll leave that. Do you want to go with the second one? Sorry, was there a second — you said on the asset level valuations for new properties, right?
Kunal Lakhan
Correct.
Ritwik Bhattacharjee
Yeah. So look, at this point in time, in the market, I think, like I said, the valuations that we kind of see in general. If we’re not comfortable and it’s not sort of trading outside where the funding costs are, we’re not going to go out there and look to sort of inject or take on a new proposal to buy, Kunal. It’s just regardless of where it is or how it is. It’s just something that we look at this very, very cautiously as well. But I think it’s in effectively our DNA and our investment philosophy to think about growth coming inorganically.
Kunal Lakhan
Thank you. Sure, sure. Thanks so much and all the best.
Operator
Thank you. We’ll take our next question from the line of Parvez Qazi from Nuvama Group. Please go ahead.
Parvez Qazi
Hi, good evening, gentlemen. So two questions from my side. First, we have some space coming up for completion in FY ’26 in the Chennai asset, so just wanted to get your outlook on the leasing outlook there. And second, it would be great to get some update on the ACV conversion, etc. Thank you.
Abhishek Agrawal
So let me take the first question. On Chennai, we’ve got a very strong pipeline on the Chennai, about 900,000 square feet of pipeline in Chennai. So we are very confident of that market. Some conversations are very matured for Block 10 as well as Block 4. So our deliveries, is about 1 million square feet and we’re very confident about lease-up of that.
Parvez Qazi
Sure. And the SEZ conversion?
Abhishek Agrawal
So SEZ conversion, as we speak, we’ve converted about 6.4 million square feet of SEZ. And we are on track to convert another 1.2 million square feet, which is in advanced process with the authorities.
Parvez Qazi
Sure. Thanks and all the best. Thank you.
Operator
Thank you. We’ll take our next question from the line of Puneet from HSBC. Please go ahead.
Puneet Gulati
Thank you. Can you also talk about your plan for equity fundraise? What is the price at which you would look to do that?
Ritwik Bhattacharjee
Yeah, Puneet, I can’t give you the price at which I’m going to do that. That needs to be something that’s really a question of where the markets are at this point.
Puneet Gulati
But some sense of how are you thinking about the equity fundraise?
Ritwik Bhattacharjee
For a targeted use of proceeds that — whether it’s for an accretive transaction or to think about the debt book — managing the debt book in the event that rates go the other way or something. I’m just we’ll be ready to transact. I think one of the key things that I always think about and the team thinks about is that you’ve always got to plan for, number one, growth; and number two, also think about it any day, right?
There is — if the — we run a pretty big debt book. And while we can fund it quite at very good terms and we have very good credit, you never know, right? So I think I’ve always been a proponent of thinking about using equity as more of a strategic weapon and making sure that we can use it. But that’s it. I think those are the broad parameters. So beyond that, I don’t really have too much of an update. It’s not that we’re out there right now actively looking at a fundraise but we’ll update the market if we are. Nothing, I mean nothing on pricing, obviously. I mean, that’s clearly something that we can’t ever think about until it happens.
Puneet Gulati
Okay. And secondly, in terms of asset addition from sponsors, so beyond the assets which are as a part of ROFO. Is there more that you can acquire from the sponsor or is the sponsor likely to move those assets into the other listed entity?
Ritwik Bhattacharjee
Look, I really don’t want to comment on that at this time. I think we’ve always sort of viewed the sponsor pipeline as, again, also an evolving pipeline. And I think there’s always — I think the sponsor has also been pretty candid about the relationship with the REIT and the fact that a lot of assets that they just state can potentially find a home in the REIT simply because, look, this is a consolidated market where — a concentrated market rather, where people tend to hold a few players hold a lot of the assets.
So I think the intricacies of how that happens, when that happens and even if that also happens is something which is where we won’t — we’ll refrain from commenting at this stage. It’s just something that will just lead to a lot of speculation and conjecture.
Puneet Gulati
And within the ROFO assets, which are the ones which you can potentially be evaluating earlier than the others? Sorry, am I audible?
Operator
[Operator Instructions] Ladies and gentlemen, we have the management team back on line. Puneet?
Puneet Gulati
Sorry, I’ll just repeat the question. So within the pipeline of the ROFO assets that you have, which is the one which you think you can potentially evaluate earlier than the others?
Ritwik Bhattacharjee
I really can’t give you an answer at this point in time, Puneet. If you can just sort of be patient for maybe a little while, we’ll probably have an update later, but not probably appropriate for us to comment right now if that’s okay.
Puneet Gulati
Okay. Yeah, okay. Thank you. All the best.
Ritwik Bhattacharjee
Thank you for understanding.
Operator
Thank you. We’ll take our next question from the line of Pritesh Sheth from Axis Capital. Please go ahead.
Pritesh Sheth
Yeah. Thanks for the opportunity. Just a few bookkeeping questions. I think you talked about the SEZ conversion. So now what’s the SEZ portfolio that we have in overall mix? And how is the vacancy between both SEZ and non-SEZ? [Technical Issues]
Operator
[Operator Instructions] Pritesh, please stay connected.
Ritwik Bhattacharjee
Hang on one second.
Abhishek Agrawal
So currently, we have about 19.5 million square feet of SEZ portfolio with about 20.8 million square feet of non-SEZ portfolio. The SEZ portfolio is at about 82% occupancy and the non-SEZ portfolio is at 93% occupancy.
Pritesh Sheth
Okay. That’s very helpful. That’s it from my side and all the best. Thank you.
Ritwik Bhattacharjee
Thanks so much.
Operator
Thank you. Ladies and gentlemen, we’ll take that as the last question for today. On behalf of Embassy REIT, that concludes this conference. Thank you for joining us and you may now disconnect your lines.
Ritwik Bhattacharjee
Thanks, everyone, for joining. Have a good evening.