MINDSPACE — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Unattributed

“Mindspace Business Parks REIT’s Q2 FY22 Earnings

Conference Call”

November 15, 2021

MANAGEMENT: MR.

VINOD ROHIRA – CHIEF EXECUTIVE OFFICER,

PREETI CHHEDA – CHIEF FINANCIAL OFFICER,

KEDAR KULKARNI – SENIOR MANAGER –

FINANCE & INVESTOR RELATIONS

Mindspace Business Parks REIT

November 15, 2021

Moderator

Good afternoon ladies and gentlemen, and welcome to the Mindspace Business

Parks REIT Earnings Conference Call for Financial Results for the Quarter and

Six Months ended September 30, 2021.

As a reminder, all participant lines will

be in the listen-only mode, and there will be an opportunity for you to ask

questions after the presentation concludes.

Should you need assistance during

the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your

touchtone phone.

Please note that this conference is being recorded.

Kedar Kulkarni:

Thank you and good afternoon everyone.

Welcome to the Second Quarter

Financial Year 2022 Earnings Call for Mindspace Business Parks REIT.

this point, we would like to highlight that the management may make certain

statements that may constitute forward-looking statements.

Please be advised

that our actual results may differ materially from these statements.

REIT does not guarantee these statements or results and is not obliged to update

them at any time.

We would like to reiterate that, the acquisition of Asset SPVs by Mindspace

REIT was effected on July, 30 2020.

Consequently, consolidation of financials

of these Asset SPVs with Mindspace REIT has been done effective 01st August

Condensed Consolidated First Half and Full Year 2021 numbers

therefore reflect 2 months and 8 months financial performance of these Asset

However, for the purpose of comparison, in the earnings presentation

and for the purpose of this call, we have provided pro-forma Revenue from

Operations and Net Operating Income for Q2 and H1 FY22.

I would now like to welcome Vinod Rohira, CEO; and Preeti Chheda, our

Vinod will share the business update and his views on the commercial

Preeti will further share an update on the financial performance.

We will then open the call to Q&A.

I now hand over the call to Vinod.

Vinod Rohira

Thank you, Kedar.

Good afternoon to all participants.

Hope you enjoyed the

festive season.

Thank you for joining Mindspace REIT’s earnings call.

As envisaged during the last quarter earnings, the sectoral tailwinds have

further grown stronger during this quarter.

The restrictions enforced during the

second wave have been relaxed across states.

Further, India is now at the

forefront of its vaccination drive having already administered over 1.1 billion

With a monthly production capacity of over 300 million doses, the entire

eligible population of our country will hopefully be fully vaccinated in next

Post vaccinations, we are witnessing a substantial shift in the

mindset from “work from home” towards “work from office”.

This is in line

with the trend observed globally.

Mindspace Business Parks REIT

November 15, 2021

Recent reports indicate over 95% of the workforce is back in office in China,

while in the US and the EU almost 40% of the employees are back in offices

resulting in resumption in demand for office spaces.

Even in India, the return

to office plans have gathered momentum and we are seeing clients gear up for

increased physical occupancy in the coming quarters.

encouraging signs across our parks as physical occupancy currently stands at

As global markets move towards return to office, the same will follow

The economic indicators and the robust tax collections in India are indicating

a strong economic recovery.

Technology companies in India have reported

further improvement in business fundamentals in their latest quarterly results,

and their hiring numbers have been revised upwards as compared to the

numbers announced during the past quarters.

NASSCOM report suggests that

GCC headcount is expected to increase by 11-12% CAGR to touch ~2 million

At present, only 15% of the Forbes Global 2000 companies and 26%

of Fortune 500 companies have set up GCCs in India.

This underscores the

immense potential of GCCs expansion in India considering the talent pool the

country offers.

All these positive trends augur well for the demand for grade A

spaces in the coming quarters.

As we had highlighted in the past quarters, the

new Grade A supply in most micro-markets will not be able to keep pace with

the uptick in demand.

On ground, we continue to see increased activity for evaluation and assessment

of new and existing consolidation needs of large technology companies.

are excited to see strong tenant engagement for space take up across our

Micro-markets of Hyderabad are expected to witness recovery in

demand as pre-commitments and additional space take-up from GCC’s are

expected to keep the absorption momentum high from 2022 onwards.

Mumbai Region, Thane-Belapur Road micro-market is expected to witness

three-dimensional demand driven by fintech, support activities of MNCs and

Many new RFPs have started floating across micro-markets and

we will continue to see this activity take greater momentum in the coming

We expect the SEZ policies to be suitably reformed to accommodate

the changing demand dynamics of technology footprint in India, allowing for

inclusive participation of domestic businesses within the modified SEZ

Our proactive efforts of utilizing the downtime to upgrade our offerings and

implementation of health and safety protocols across all our parks, have

enabled tenants to scale up their return to office plans.

This has not only helped

us retain existing tenants within our parks but ensured that they choose us as

their preferred partners for their expansion plans. 92% of leasing during the

quarter was with our existing tenants which is a testament to this.

November 15, 2021

The leasing momentum that we have witnessed across our parks in this quarter

is in tandem with the growth of technology companies and we expect them to

continue their footprint expansion in the coming quarters.

We have achieved a

gross leasing of 2.1 million square feet within the portfolio in the first half of

this financial year of which 0.9 million square feet was in Q2 FY22.

achieved a releasing spread of 21.6% in this quarter.

We would like to highlight

some of our key transactions: our BKC asset is now fully leased with the

addition of a marquee BFSI tenant.

On the ROFO side, in addition to the pre-

leasing of c.1.8 msf during the last quarter at Commerzone Madhapur in

Hyderabad, this quarter saw pre-leasing activity at our other ROFO asset

Mindspace Juinagar located in the Mumbai Region, where we successfully

concluded another Build-to-Suit (BTS) lease deal of 0.5 million sq. ft with an

Our Net Operating Income for the quarter stood at INR 3.6 billion, up by 6.7%

Our collections have remained strong at over 99% throughout the

pandemic, as we continue to focus on having high-quality tenants in our

Our distributions stood at INR 2.7 billion or INR 4.60 per unit.

Value has increased to INR 357.8 per unit representing an increase of 3.6%

over March 2021.

Reduced interest rates and low gearing of our Portfolio provides us with the

room to pursue asset enhancements and other growth opportunities at our parks

which are long term value accretive to our Unitholders.

I would now like to take you through the specific operational updates for the

second quarter,

• We achieved a gross leasing of 0.9 million sq. ft. for the quarter ended

September 30, 2021.

Of this 0.6 million sq. ft. was on account of re-leasing and

0.3 million sq. ft. was new area leasing.

• In the first half of this financial year, we have achieved leasing of 2.1 million

sq. ft. across our REIT portfolio.

• We are happy to announce that our BKC asset is now fully leased.

• Committed occupancy is at c.85.0% for the September quarter.

• Average rent realized on this 0.9 million sq. ft. of leasing was INR 88 per sq.

November 15, 2021

• We achieved a re-leasing spread of 21.6% on the 0.6 million sq. ft. area re-

• The in-place rent in our portfolio has grown from INR 57.1 per sq. ft. in the

previous quarter to INR 58 per sq. ft.

• 92% of the leasing during the quarter was to existing tenants while balance was

to new tenants.

• Our ROFO asset at Mindspace Juinagar in Mumbai has witnessed preleasing

of 0.5 million sq. ft.

• Of the total leasable area, our portfolio had 23.9 million sq. ft. of completed

area constituting to c. 91% of our portfolio value. 1.8 million sq. ft. is currently

under construction and we have another 5.6 million sq. ft. available in the

portfolio for future development.

Our portfolio is leased to more than 170+

marquee clients with an average in-place rent of INR 58 per sq. ft. and a

weighted average lease expiry of 6.7 years.

• Our REIT was awarded the prestigious ‘National Builder Winner’ and our

project Gera Commerzone, Kharadi has won ‘Noteworthy Project Award’ at

the ‘The Construction World Architect and Builder Awards 2021’.

• Mindspace Madhapur (Sundew-SEZ) also won various awards including

‘Highest Exports’, ‘Highest Number of Women Employees’ and ‘Regional

Growth Drivers’ at Annual Exports Awards organized by Export Promotion

Council for EOUs and SEZs at Vishakapatnam SEZ authority.

• As of September 30, 2021, we facilitated over 95,000 vaccinations at our parks

which included family members of the labourers and employees who are

working for us as well as for our tenants.

• As part of our CSR initiative, we have constructed an additional floor at a

hospital at Kondapur, Hyderabad resulting in the addition of 120 new beds and

handed it over to the government.

At Mindspace REIT, our endeavor to emerge as a responsible organization

motivates us to implement sustainable business practices across our operations.

At this point, I will now hand over to Preeti to walk you through our financial

highlights of the second quarter and six months ended September 30, 2021

Preeti Chheda

Thank you Vinod.

Good afternoon, everyone.

Mindspace Business Parks REIT

November 15, 2021

On the financial performance, we closed the second quarter of the financial

year 2022, with a Revenue from Operations of INR 4.2 billion.

Income for Q2 FY22 stood at INR 3.6 billion, a 6.7% increase over NOI for

Cost optimization measures helped achieve this NOI.

to maintain NOI margin at 80% plus.

We announced a distribution of approximately INR 2.7 billion i.e., INR 4.60

per unit for the quarter ended September 30, 2021.

This distribution comprises

approximately 93% i.e., INR 4.28 per unit of dividend, which is not subject to

tax in the hands of unitholders, and approximately 7%, which is, INR 0.32 per

unit of interest.

This translates to an annualized distribution yield of 6.7 % on

the issue price.

With this, the total distribution for H1 FY22 is approximately

INR 5.5 billion i.e.

INR 9.2 per unit, which translates to an annualized yield of

6.7% on the issue price.

On the funding side, our leverage on the portfolio on a consolidated basis stood

Our net debt as on September 30, 2021 was INR 38.5 billion.

continue to have undrawn committed lines of INR 4.6 billion from financial

Given our low leverage levels and the strength of our balance

sheet, we have considerable headroom available in the Portfolio to raise further

debt for our Portfolio expansion and inorganic growth opportunities.

During the quarter we raised INR 4 billion through issuance of listed non-

convertible debentures at an attractive coupon of 6.1% per annum.

our average cost of debt stood at 6.9% as of September 30, 2021.

achieved a substantial reduction of c. 235 bps in our average cost of borrowing

over the last 18 months.

We continue to pursue opportunities to further reduce

our borrowing cost.

Also, during the quarter, we had certain regulatory amendments like reduction

in trading lot size, FPIs being permitted to invest in debt securities of REITs,

which are very encouraging and would bring in wider investor participation in

REITs leading to enhanced depth and liquidity for the instrument.

reduction in trading lot size, we have seen the number of unitholders in our

REIT grow by over 30%.

We expect the move to allow FPIs to invest in debt

securities of REITs to help provide long term capital and open up new avenues

of fund raise for REITs.

The Gross value of our Portfolio, as valued by the Independent Valuer, stood

at INR 257 billion as at September 30, 2021, a 4.4% increase over the value as

at March 31, 2021.

Our Net Asset Value per unit has increased to INR 357.8

per unit as on September 30, 2021 from INR 345.2 per unit as at March 31,

November 15, 2021

With this I now handover the call to Vinod for his concluding remarks.

Vinod Rohira

As anticipated in our previous quarterly earnings call, we are beginning to see

strong leasing inquiries across our portfolio.

We remain increasingly confident

of the commercial market outlook, driven by record tech hiring and growth.

Aggressive administration of vaccinations across the country and the buoyant

economic activity is expected to lead towards a robust demand cycle in the

coming quarters as companies accelerate their transition from “Work from

home” to “Work from office”.

I thank you all for the patient hearing.

I request the operator to now open the

floor for questions-and-answers.

Questions and answers

Moderator

We will now begin the question-and-answer session.

The first question is from

the line of Adhidev Chattopadhyay from ICICI Securities.

Please go ahead.

A Chattopadhyay:

The first question is for our 0.9 million square feet of expiries in the second

half of this year.

So, do we now see the vacancies are bottoming out?

would you like to share in terms of by when do you see our occupancies

moving back to sort of a pre-COVID level?

I know it's a little early days, but

if you could share any insights on what is your own internal estimate for that.

Vinod Rohira

The activities have certainly become strong.

We see demand coming back and

we are seeing stickiness of tenants to want to retain & re-lease the spaces.

will see physical occupancy start rising starting first quarter next calendar year.

And we continue to see that trend, because most tenants are coming back to

office in an eager fashion.

So, you will see occupancies rise and reduction in

vacancies in the coming quarters.

A Chattopadhyay:

So, these 0.9 million square feet, do you expect this should remain flat or it

may go up into occupancy in the second half of this year or do you anticipate

some further overall portfolio vacancy going up marginally?

So, if you see the 2.4 million square feet, which we had looked at the beginning

of the year, including early expiries and vacancies, out of that about 800,000

square feet has been vacated.

Additionally, we have already re-leased 800,000

square feet and we have high re-leasing visibility of another 400,000 square

So when you combine all of these together, predominantly most of that

vacancy picture is clear.

A Chattopadhyay:

So out of these 0.4 million square feet, you have high visibility, other 0.5

million square feet is touch and go depending on when discussions are

concluded, is that understanding correct?

Mindspace Business Parks REIT

November 15, 2021

Vinod Rohira

Yes, so 0.4 million square feet, we've already initiated discussions moving

Additionally, once discussions engage, we'll get there.

A Chattopadhyay:

Then finally, for all these new leases, which you are signing or maybe the

renewal of this, obviously, only for the new leases, especially for The Square

and the other assets, where you have done the leasing, what is the rent fit out

period or the rent period which will be there for the tenants and by when do we

see these rents starting to accrue to the REITs?

So, for this particular asset at BKC, rent starts from 1st April 2022.

A Chattopadhyay:

And any forward leases also would be of similar nature?

It depends on size, if it's a large size tenant, they require larger period to fit out,

smaller size require reasonably the same time as we have envisaged.

A Chattopadhyay:

So around four to six months across the board is a fair assessment?

Moderator

The next question is from the line of Manish Agarwal from JM

Please go ahead.

Manish Agarwal

My first question would be pertaining to the Gera Commerzone Kharadi on

So by when is it expected to be ready?

And when would the

rental commencement start?

And how is the pipeline shaping up for this asset

Vinod Rohira

I can't give you any forward-looking statements, Manish, but we want to bring

this asset quickly into the market, which is under construction, 700,000 square

feet, targeted to complete by June next year.

We are seeing good number of

RFPs in that micro market.

So we are quite confident of leasing that asset.

Manish Agarwal

You have indicated that there has been an exit withdrawal of 0.2 million square

So some tenants seem to have canceled the exit plans.

So, what exactly

happened over there?

This was across which asset?

Vinod Rohira

I'm very happy you raised that question.

It’s a very strong indicator of the

market dynamics.

It was our tenant in Mumbai Region in one of our Mindspace

Parks, who had submitted the notice for exit.

But within six-month period, they

realized that the business is coming back and need for space and physical

occupancy is important.

Consequently, they pulled back the notice just before

completion of that tenure.

And we are very happy to accommodate.

one of our marquee tenants.

Mindspace Business Parks REIT

November 15, 2021

Manish Agarwal

Third question will be pertaining to The Square Nagar Road.

So the run rate

over the past three, four quarters seems to have dipped although the asset is

currently occupying 100%.

What exactly is happening over there?

Vinod Rohira

So, we had mentioned earlier that we were adding 60,000 square feet of

additional construction area by retrofitting some part, which was otherwise

earlier leased to PVR Cinemas.

And that retrofit has got already part pre-

So that's the activity that you're seeing.

Manish Agarwal

The rentals haven't started?

Vinod Rohira

For this portion, once the construction completes, rent would start.

Manish Agarwal

And last question on the BKC rental.

So, what will be the rental per square feet

starting April 01, 2022?

Vinod Rohira

Essentially, I can give you a broad heads up on the gross revenue for the year,

is about INR 42 crores annualized.

Moderator

The next question is from the line of Kunal Tayal from Bank of America.

Please go ahead.

Kunal Tayal

Vinod, you were talking about strong upcoming demand.

So, would be great if

you can just give us some color around what profile of tenants are you finding

particularly active in the marketplace for the next set of leasing?

also a category which so far does not seem to be indicating any new activity

from their perspective?

Vinod Rohira

I think there's activity across technology spectrum companies, BFSI, FinTech,

all of those companies are active. the FAANG companies are also very active.

Each micro market has a different demand trajectory, but all micro markets are

picking up in terms of enquiries.

And I think this will convert to a strong

demand for real estate in the coming quarters.

Kunal Tayal

And then the second question was on your own sense about the supply

Sure, these have come down in last 18 months.

Do you get a sense

that these are projects that just got deferred because of the uncertainty or have

they moved out of the supply pipeline on a more permanent basis, that let's say

the landlord no longer plans to construct an office asset on these?

Vinod Rohira

It's a combination of both.

So, in some micro markets, there was no overhang

of under construction supply.

There, the new supply would have come from a

combination of alternatives where they were trying to convert a residential to

commercial, as residential is continuing to do well, the attention has shifted

Mindspace Business Parks REIT

November 15, 2021

back to doing residential.

So that is kind of pushing out prospective probable

commercial supply, which would have come to those micro markets.

you know, product choices are very different now, customers are looking at

products very closely and very sensitively for true Grade-A assets.

of further diminishes supply.

In certain micro markets where the work had

paused, you're still not seeing activity on the ground pick up, but no new supply

is really coming.

Moderator

The next question is from the line of Mohit Agarwal from IIFL.

Mohit Agarwal

My first question is, if we look at your NOI numbers, they've been flat for last

So, despite declining occupancy, the escalations have ensured

that the NOI numbers are flat.

How do you see this going forward and when

do we start to see a sharp pick up?

Will it follow a six-month lag from the start

of the leasing pickup?

And connected to that is what is also our guidance for

the second half if you can shed some light around that?

Preeti Chheda

Mohit, in terms of NOI, as I'd mentioned even earlier, because of deferment of

some of the rent start dates, you've seen marginal rise in the NOI, but going

forward in the next few quarters, as the rent start coming in for these spaces

which we have leased in the last two, three quarters, we should start seeing the

uptick in the rent and the NOI consequently.

Mohit Agarwal

And that should be in this fiscal?

Preeti Chheda

It will be over the next two-three quarters, it depends on when the rent start for

the respective leases.

Mohit Agarwal

And any guidance you want to give on distribution for FY22?

Preeti Chheda

We would not be able to achieve FOD numbers because of staggered rent

starts, but as I said, substantial part of that will be offset by the interest saving

that we've achieved in this financial year.

I won't be able to give you a precise

I would say a large part of that we should be able to recoup but

there'll of course be some residual impact.

Mohit Agarwal

We've talked about on the Airoli West portfolio the process of denotification

of SEZ and you've mentioned earlier about some policy changes from the

government which had to come.

So, any updates around there?

Vinod Rohira

I think it's progressing very well.

We are very hopeful that the direction for

amending and helping out with allowing for rupee billing and domestic

Mindspace Business Parks REIT

November 15, 2021

businesses similar to the STPI footprint will be allowed to co-exist in the SEZ.

We are hoping for that to come in the next couple of months.

Mohit Agarwal

So that combined with the fact that now leasing will also pick up, any

expectation in terms of when this asset could be leased out like in a couple of

quarters or so?

Vinod Rohira

So, we're seeing the undercurrent for demand is getting stronger and we're quite

confident of being able to lease this asset.

Moderator

The next question is from the line of Vivek Ramakrishnan from DSP Mutual

Please go ahead.

V Ramakrishnan:

I'm just following up on the previous question on Airoli West.

denotification important for the occupancy levels to go up significantly?

newer properties in Porur and the one in Hyderabad, we can already see the

committed occupancy has gone up, what will be the next big drivers for these

two properties?

Vinod Rohira

So denotification certainly will help because it allows SEZ & Non SEZ tenants

to co-exist in the park.

So, it certainly helps in filling the vacancies up quicker.

With respect to Porur, yes, it's a new asset and we're now seeing Chennai

demand beginning to pick up.

So as that demand trajectory starts to grow, you

will see occupancy pick up for that Porur asset as well.

V Ramakrishnan:

So, if I can ask for a clarification, Airoli West, is the denotification very

important for the numbers from committed occupancy, which is currently close

to 68.6% have jumped significantly, or you can do it even before the

denotification happens?

So there are two parts to the product offering.

One part which we already

denotified which is under construction, we are already seeing demand

trajectory move up for that non-SEZ building and we're very confident of

leasing that out quicker than what we had anticipated.

Having said that,

additionally, that allows for more room to bring in more denotified assets

within that portfolio to offer for additional leasing.

While some of those assets

we've already applied for denotification, and that will come in as pipeline to

bring in more supply, it will certainly help if we can offer non-SEZ occupiers’

additional space.

So yes, it will help in the reducing of vacancies.

Moderator

The next question is from the line of Shashank Savla from Somerset Capital

Please go ahead.

Mindspace Business Parks REIT

November 15, 2021

Shashank Savla

First question is related to Airoli West NOI.

So, if I look at the net operating

income that reduced by around 40 million this quarter from 390 to 350.

any reason of what's driving that decrease?

Preeti Chheda

So, what happens is in Airoli West we have certain buildings which have got

completed and generally property tax assessment takes a while to complete.

Now, since it's almost getting complete, we have better visibility in terms of

what that tax would be.

So that's one provision of tax which has come in this

Shashank Savla

Is that a one-off or is it like ongoing one?

So, if I look at the NDCF at the SPV level, and distribution to the REIT, there

is a shortfall of around 200 million from that.

So, is that from previous amount

held back at the SPV which were not distributed to the REIT?

Preeti Chheda

We had certain amounts which were lying in the escrow account, because we

have certain commitments for debt covenants.

Since that amount has now got

freed up, we have distributed that amount.

So, there's a difference because of

Shashank Savla

So, I'm just trying to understand going forward would the NDCF at the SPV

level be similar to the distribution to the REIT or is there some adjustments or

which you make to smooth out the cash flow?

Preeti Chheda

There is nothing of that.

This is only a one-off case wherein we had some of

these balances lying in the escrow account such as restricted cash.

otherwise, broadly, whatever is the NDCF at the SPV, more than 90% of that

Shashank Savla

I'm also trying to understand how the CAPEX spend and the debt which is

raised to impact the overall NDCF.

So, is there a case that if you borrow more,

would you be able to pay out that as distribution?

Preeti Chheda

For us whatever CAPEX we incur, we incur that out of debt.

CAPEX doesn't affect our NDCF because that money comes in from debt.

Most of the distributions which we are seeing at the SPV levels and

consequently at the REIT that are largely coming out of your net operating cash

Mindspace Business Parks REIT

November 15, 2021

Shashank Savla

Generally, I wanted to understand the trends in terms of rents and incentives.

So, are you seeing any improvement in terms of incentives you have to provide

for new leasing?

Vinod Rohira

Predominantly, the landscape hasn't changed except for the fact that this likely

take longer now to do their fit outs, as there are challenges which tenants are

facing with respect to either equipment imports or labor not being available.

So there is a little extra time they asked for fit out.

Otherwise, it's business as

Shashank Savla

Finally, on Chennai which has around like 17% committed occupancy.

much time would it take for you to reach your like 80%, 85% occupancy, which

is across your rest of the assets?

Vinod Rohira

We should be comfortably leased out in that asset on or before the end of next

financial year.

Moderator

The next question is from the line of Satinder Singh Bedi from Eon

Please go ahead.

Satinder S Bedi:

I have two small questions.

One is Vinod, if you could clarify, again, Airoli

West today, so given the 20%-plus differential in occupancy between Airoli

West and East, so can you help us understand better in terms of what

percentage of Airoli East for example is SEZ and non-SEZ and how does it

stack up on Airoli West because it has come out earlier in the discussion that

probably denotification is one big kicker that could probably narrow this gap,

can cause finally the micro market is the same?

Vinod Rohira

So essentially Airoli East was an SEZ that was built much before Gigaplex, so

which is why that entire park currently whatever is built is an SEZ.

we started the project a bit later and in that we had some additional speculative

SEZ supply, which unfortunately because of having passed through an 18-

month COVID pandemic across, the SEZ demand had slowed down in that

zone because everyone was working from home at that point in time.

obviously the SEZ seeing a sunset, government realizes that the SEZs have

created huge employment opportunities and they want to give a lot of booster

to the SEZ to become an attractive place for further employment and

technology footprint to grow, so which is why flexibilities around denotifying

in allowing for domestic rupee billing, etc., to be participated in the SEZ are

We have more opportunity in Gigaplex because most of Airoli East

So Gigaplex automatically had some speculative space which we had

built for SEZ demand which now will get used for non-SEZ demand.

Mindspace Business Parks REIT

November 15, 2021

Satinder S Bedi:

So what we're saying is East is otherwise fully SEZ, West is almost fully SEZ

but by changing a part of it to non-SEZ, we will be able to fill it up?

Vinod Rohira

Yes, but at the same time when you get this legislative change that will happen,

will allow us flexibility in non-SEZ, not just Airoli East or West, anywhere we

have SEZs, we will be able to bring in rupee billing in domestic businesses to

participate, which allows for more demand to come to the SEZ portion of our

So, it'll be universally probably giving benefit to all parks.

Satinder S Bedi:

Preeti, going back to the NDCF build up, you've explained the difference in

the NDCF and SPV level and SPVs to REIT and we also discussed the CAPEX

and the debt drawdown.

Now, the debt drawdown is about Rs.1,224 million,

the CAPEX including the interest is Rs.1,081 million, that is a difference of

about Rs.206 million, and then there's a working capital change of about

Rs.170 million.

So, is part of this contributing to the distribution finally, can

you help us understand this piece?

Preeti Chheda

So, as far as CAPEX goes, as per the accounting requirements, some

of the fit-out, which is generally CAPEX for us gets classified under working

So, if you add that then broadly most of the CAPEX is funded by the

debt which we have raised.

Now, in terms of the overall NDCF, all your

working capital changes also a part of your operating cash flows, because

keeping the fit-out cost aside, only other things are largely your creditors &

debtors movements.

So, working capital is also part of your operating cash

flows and therefore, they do contribute to your NDCF.

Satinder S Bedi:

So, this Rs.206 million difference between the drawdown and the CAPEX, is

that Rs.206 million contributing to the NDCF payout?

Yes, it does, but that has got drawn to fund the fit-out cost which is sitting in

working capital.

Essentially most of our debt gets drawn for the purpose of

So here the difference which you see has gone to fund some of the

working capital.

Now, working capital number which you see has certain

positives and negatives.

So the fit-out cost which I am talking about is one of

the constituents of the working capital changes.

So, if you take that, in CAPEX,

and broadly your net debt is taken to fund our CAPEX plus fit out for the

Moderator

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

Please go ahead.

Sameer Baisiwala

Just on the previous question, Preeti, your working capital is a positive Rs.17

crores and into this we should subtract minus Rs.20 crores because of fit out,

so what is causing this for Rs.37 crores working capital gross?

Mindspace Business Parks REIT

November 15, 2021

Preeti Chheda

As you know, I've always been telling this working capital changes are

positive, negative quarter-on quarter.

This time, there have been certain

provisions which we made from cash flows & those have not happened.

those get added back as they have been reduced from your PAT.

have been certain positive cash flows on the working capital side on the

creditors, that also has helped get this working capital to positive.

Sameer Baisiwala

Okay, but in real life, like which creditor has contributed positively?

Preeti Chheda

So what happens is, any kind of increase in creditors or reduction in debtors,

all of these add to your CAPEX, because that's how this whole cash flows get

So any increase in your CAPEX essentially gets added to that and of

course, there are provisions also which get added back because these are

deducted from your revenue from operations.

Sameer Baisiwala

Second question related to this is as you got 1.7 million square feet of new

completions coming up next year and plus your vacancies will go down, so all

of this new leasing will probably give up a lot of deposits.

think about that, I mean, will this all be used for DPU?

Preeti Chheda

movements, all of that becomes a part of NDCF.

And we've always had that,

Sameer, because in some quarters, you have positive, negative on security

Sameer Baisiwala

Sure, fair enough.

I just wanted to understand where you will continue with

The second question is, how are you thinking about new construction starts for

Brownfield expansion beyond this 1.7 msf, which is just about nearing

Vinod Rohira

Great question.

I think we are already firming up on our plans to start

construction in each of our parks.

We have an additional c. 1 million square

feet to build in Pune and we have the redevelopment opportunity in Hyderabad

which is 1.3 million square feet.

We are on track to bring those as envisaged

into the market.

Already ground work in terms of the design, detailing,

approvals, all of that is in process.

We should break ground really soon.

Sameer Baisiwala

So, 2.3 million square feet is what you will start in 2022 and delivery by

Mindspace Business Parks REIT

November 15, 2021

Sameer Baisiwala

Any thoughts on Airoli West?

Vinod Rohira

We are seeing demand trajectory move up.

Airoli West, we want to continue

to position additionally for similar build-to-suit opportunities to what we did

We believe there is more scope to do those going forward in the

Sameer Baisiwala

My final question is on your Hyderabad ROFO asset.

As you mentioned that

you would rather want to acquire close to OC and fit out getting completed but

given the current low interest rate environment, and who knows what happens

in one year, do you not want to lock it earlier than later?

Vinod Rohira

So we are working in that direction and we want to bring it in soon at the right

and most appropriate time, we will take it up in the next couple of quarters.

Sameer Baisiwala

If you can confirm whether that would be yield accretive for the current

Preeti Chheda

At this stage, I would say, we will do whatever is in the best interest of the unit

holders, whether it be yield or NAV or other parameters.

I am sure we will be

discussing with the board as Vinod said in a few quarters and at an appropriate

time we will have the asset brought in.

Moderator

The next question is from the line of Sri Karthik from Investec.

Sri Karthik

Could you speak a bit about your data centers plans in any of the properties?

Vinod Rohira

Data centers currently for India is primarily the build-to-suit space.

we have fortunately footprint in Mumbai region and Hyderabad where we can

explore opportunities for build-to-suit.

We are continuing to do that.

see some demand continue to be there for those micro markets for data centers.

Sri Karthik

I just wanted to double check the indicative guidance you have given, for Porur,

do you expect to see full occupancy levels by the end of FY'23, right?

Moderator

The next question is from the line of Rahul Marathe from ICICI Prudential

Please go ahead.

Mindspace Business Parks REIT

November 15, 2021

Just a small book-keeping question.

So, currently, our net debt-to-market value

So, what will be the maximum level where we would not exceed

Preeti Chheda

Technically, as per the REIT regulations, we can go up to 49% LTV, but our

comfort would be somewhere around 25% to 30%.

If it goes beyond that and

we see some real lucrative opportunities, then we wouldn't mind going and

doing further equity rise at that point in time.

Moderator

Ladies and gentlemen, that was the last question for today.

Mindspace Business Parks REIT, that concludes this conference.

for joining us and you may now disconnect your lines.