Release Date: April 30, 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) achieved its highest ever quarterly leasing since listing, with 2 million square feet leased in Q4 FY24.
- The company reported a strong financial performance with FY24 NOI growing at 12% year-on-year, excluding one-offs.
- Six out of nine parks have occupancy rates above 95%, with some parks achieving 100% occupancy.
- Mindspace Business Parks REIT has a robust pipeline of under-construction assets, including significant projects in Pune and Hyderabad.
- The company is actively engaging in sustainability efforts, achieving 28.9% green energy in total energy consumption for FY24 and maintaining a 99% green building footprint.
Negative Points
- Despite strong leasing activity, the company still has 2.4 million square feet of vacant space, primarily in SEZ areas.
- The cost of debt is expected to rise marginally due to refinancing, potentially impacting financial performance.
- There is a significant gap between committed and actual occupancies in some parks, such as Airoli East, Airoli West, and Commerzone Porur.
- The company faces challenges in pre-leasing under-construction assets, which could impact future rental income.
- Mindspace Business Parks REIT is planning to divest its non-core asset in Pocharam, indicating potential difficulties in maintaining occupancy and profitability in that location.
Q & A Highlights
Q: Can you share your experience in terms of timelines and how is it split between your Airoli assets and Madhapur asset for the 1.5 million square feet demarcation?
A: Almost all the demarcation we have applied is for Airoli. There is some interest for SEZ in Hyderabad, Madhapur, but no area was asked for demarcation there. We have applied for 1.9 million square feet and already received approval for 400,000 square feet. The government has issued clarifications, and we expect approval for the remaining area soon. (Ramesh Nair, CEO)
Q: Your renewal rate was very healthy in Q4. Do you expect this trend to continue into FY25?
A: Renewals have been strong due to significant upgrades. For FY25, we already have 70% visibility on the 2 million square feet of expiries. We are proactively engaging with tenants to retain them. (Ramesh Nair, CEO)
Q: Is there an occupancy target for FY25 given the expected healthy demand?
A: Our priority is leasing the remaining 1.8 million square feet in Airoli, which we expect to lease in the next 1.5 years. We anticipate ending FY25 with higher occupancy levels. (Ramesh Nair, CEO)
Q: What is the expected impact of the new NDCF framework on the composition of distribution?
A: The new NDCF format is not expected to impact the quantum of distribution significantly. It will be more in the nature of ROC, which doesn't have immediate tax impact. (Preeti Chheda, CFO)
Q: How much of the 3 million square feet vacant space is SEZ versus non-SEZ?
A: With the decision to sell Pocharam, our vacancy is down to 2.4 million square feet, of which 1.9 million is SEZ and 0.5 million is non-SEZ. Our non-SEZ occupancy is at 96.2%, and SEZ occupancy excluding Pocharam is nearly 86%. (Ramesh Nair, CEO)
Q: What is the pre-leasing status of the 4.1 million square feet under construction assets?
A: The assets typically start seeing enquiries around six to nine months before completion. We are not worried about pre-commitment as it may not capture rental upside. The data center is already pre-leased. (Ramesh Nair, CEO)
Q: What was the cost for the demarcation process?
A: The current cost is around INR300 per square foot. This may vary slightly but is a good thumb rule to assume. (Ramesh Nair, CEO)
Q: What is the expected impact on NOI growth and NDCF given the rising occupancy and interest expenses?
A: We expect both NOI and NDCF to show healthy growth next year. The interest increase is not material enough to significantly impact NDCF growth. (Preeti Chheda, CFO)
Q: What are the rental trends and market outlook for the next year?
A: The market is consolidating among a select list of developers, which will drive rental growth. We see a healthy pipeline of RFPs in our key cities, especially Hyderabad, which has significant demand. (Ramesh Nair, CEO)
Q: Are there any other factors that might offset the positive impact on NDCF growth?
A: We do not see any other surprises. Leasing of vacant spaces, mark-to-market, and escalations should contribute to healthy growth. (Preeti Chheda, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
