Release Date: October 25, 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 a significant increase in net operating income (NOI), growing from 4.79 billion to 5.03 billion, marking the first time it crossed the 5 billion mark.
- The REIT's occupancy rate improved from 87.6% to 91.7% over the last 12 months, indicating strong demand for its properties.
- The company successfully leased 2.1 million square feet during the quarter, contributing to a 60 basis point increase in occupancy rates.
- Mindspace Business Parks REIT (BOM:543217) reported a 7.5% year-on-year increase in distributions, reaching 3.05 billion for the first time.
- The REIT's data center portfolio expanded significantly, growing from 0.6 million square feet to 1.7 million square feet, strengthening its position in the data center market.
Negative Points
- The REIT's borrowing cost remains relatively high at 7.93%, which could impact profitability if interest rates rise.
- Despite improvements, the vacancy rate in some areas remains a concern, with 2.1 million square feet of vacant space still needing to be leased.
- The technology sector, a significant tenant base, showed reduced leasing activity, which could impact future occupancy rates if the trend continues.
- The REIT faces competition from newer buildings, which may offer more modern amenities and potentially attract tenants away from older properties.
- The cost of upgrading existing buildings is substantial, with an estimated capex of 170 crores for upgrades, which could strain financial resources if not managed carefully.
Q & A Highlights
Q: Can you discuss the supply side of the office space market and how it affects Mindspace Business Parks?
A: Ramesh Nair, CEO, explained that the office space market is highly consolidated with only about 15 major developers. Mindspace holds prime locations, reducing concerns about new supply. The company is actively upgrading its properties to remain competitive against newer buildings.
Q: What is the strategy for the data center business, and how much investment is required?
A: Ramesh Nair, CEO, stated that Mindspace provides a cold shell structure for data centers, costing around INR 7,000 per square foot. The company does not invest in internal infrastructure like racks and cooling systems, focusing instead on long-term leases with stable rental escalations.
Q: Why is there a lack of tech tenants in recent leasing, and what is the occupancy outlook?
A: Ramesh Nair, CEO, noted a drop in tech tenants due to industry trends, with current leasing dominated by engineering, manufacturing, and co-working sectors. The company aims to reach 93.5% occupancy by the end of FY25, with significant leasing expected in Navi Mumbai and other key locations.
Q: What is the leasing outlook for the Airoli assets, and how do you see occupancy levels changing?
A: Ramesh Nair, CEO, expressed optimism about Airoli, citing recent large leases and infrastructure improvements in Navi Mumbai. The market demand is around 2 million square feet annually, and Mindspace aims to capture at least 50% of this demand.
Q: How are data center deals structured, and what are the terms of these agreements?
A: Ramesh Nair, CEO, explained that data center leases typically have a 20-year initial term with two 10-year renewal options. There is a 15-year lock-in period with annual rent escalations of around 4%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
