Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mindspace Business Parks REIT (BOM:543217, Financial) reported strong leasing performance with 1.1 million square feet leased during the quarter.
- The company achieved a 50 basis points increase in occupancy rate to 91.1%, excluding Pocharam.
- Revenue and NOI grew by 10.6% and 9.2% year-on-year, respectively.
- The company announced a 5% increase in quarterly distribution, amounting to INR300 crores or 5 per unit.
- Mindspace Business Parks REIT (BOM:543217) has a robust balance sheet with low debt levels, providing financial flexibility for growth opportunities.
Negative Points
- Despite the increase in occupancy, nearly 1 million square feet of expiries were noted during the quarter.
- The average cost of debt has marginally increased to 7.9% PAPM at the end of Q1 FY '25.
- The company deferred ROFO acquisitions due to market volatility and tax changes, impacting expansion plans.
- Occupancy rates in Airoli East and West SEZ spaces remain relatively low at 79% and 70%, respectively.
- The gap between rent yieldings and committed occupancy has increased meaningfully over the last two quarters.
Q & A Highlights
Q: What is the outlook for gross leasing numbers for the full year, and what is the occupancy target by the end of the year?
A: (Ramesh Nair, CEO) We believe our occupancy numbers, which stand at 91.1%, will increase to around 92.5%-93% in the next 12 months and reach 95% in another 12 months. We have set a business plan target of close to 3 million square feet of gross leasing for this year.
Q: When do you plan to start considering ROFO acquisitions or third-party acquisitions?
A: (Preeti Chheda, CFO) We deferred acquisitions due to market volatility and tax changes. We will start looking at acquisitions once market conditions stabilize and the spread between our trading price and NAV improves. We plan to evaluate acquisitions within this financial year.
Q: How do you see the return perspective between commercial development and data centers, and what is the vision for investments in data centers?
A: (Ramesh Nair, CEO) Data centers offer higher returns than office spaces. Most data center deals are build-to-suit, allowing quicker completion and faster returns. Given the high demand in Navi Mumbai, we are well-positioned to develop more data centers within our parks.
Q: How do you expect market rental rates to behave in the coming 1-2 years?
A: (Ramesh Nair, CEO) Market rental rates have been increasing. For example, in Hyderabad, we were doing deals in the late 60s last year, and now we are able to do deals at INR75. We expect to achieve even higher rates with our new buildings.
Q: When do you expect occupancy levels in Mindspace Airoli to improve and reach pre-COVID levels?
A: (Ramesh Nair, CEO) We expect to lease the 19 lakh square feet of vacant space in Airoli within the next 1.5 years. Our goal is to achieve an overall portfolio occupancy rate of 95%-96% in the next 1.5 to 2 years.
Q: What are the possible timelines for the 0.8 million square feet mixed-use assets in Airoli East?
A: (Ramesh Nair, CEO) We have already signed up a 300,000 square feet anchor tenant for the 800,000 square feet building. We expect to complete the 1.5 million square feet project and the mixed-use building by 2027-2028.
Q: What are the current occupancy levels in your SPVs?
A: (Ramesh Nair, CEO) For SEZ space, occupancy rates are a little above 85%, and for non-SEZ space, occupancy rates are 98%.
Q: Why is the tax-free component of the distribution being counted as taxable dividend in the AIS?
A: (Preeti Chheda, CFO) You should refer to Form 64B, which we send to all unitholders at the end of the year. It provides a clear breakdown of how much distribution is taxable as dividend, interest, etc. You should follow the classification in Form 64B for tax purposes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
