Mindspace Business Parks, a prominent owner, and developer of high-quality Grade A office spaces in key Indian office markets, has released its financial results for the quarter ending June 30, 2023. The company's performance during this period reflects significant achievements in gross leasing, re-leasing spread, in-place rents, and net operating income (NOI).
During Q1 FY24, Mindspace Business Parks recorded a gross leasing of approximately 0.4 million square feet (MSF) and achieved a re-leasing spread of 10.1% on around 0.3 square feet of re-let area. Notably, the company's in-place rents experienced a substantial year-on-year (YoY) increase of about 5.9%, reaching INR 66.2 per square foot/month. Additionally, its net operating income (NOI) displayed strong growth, rising by 4.7% quarter on quarter (QoQ) to INR 4,570 million.
The company successfully managed its borrowing costs, with an average borrowing cost of 7.7% at the end of Q1 FY24. Mindspace Business Parks efficiently raised INR 5 billion through non-convertible debentures (NCDs) at the REIT, achieving interest savings of over 100 basis points on the borrowing.
Furthermore, the income distribution amounted to INR 4.8 per unit, showcasing a growth of 1.2% YoY. The record date for the distribution has been set for July 31, 2023, and the payment of the distribution will be processed on or before August 8. The regulatory filing indicated that 90.2% of the distribution, equivalent to INR 4.8 per unit, constitutes tax-exempt dividends for the unitholders.
Vinod Rohira, the Chief Executive Officer (CEO) of K Raheja Corp Investment Managers Private Limited, the Manager of Mindspace REIT, emphasized the significance of India's emergence as a crucial hub in the global service sector value chain. He highlighted the strong demand for non-SEZ Grade A office spaces, fueled by the growth of domestic Indian companies and the provision of cost-effective technology support services.
Mr. Rohira further acknowledged the positive impact of the committed occupancy of their portfolio, leading to a remarkable 13.8% YoY growth in NOI. While the company's operational and financial performance remained healthy, he expressed vigilance in response to the evolving economic environment.
The company's strong financial position is evident in its low loan-to-value ratio of 18.8%. Mindspace Business Parks is actively engaged in the development of an under-construction pipeline of 2.5 msf and has already initiated work on an additional 1.6 msf re-development project, demonstrating the company's commitment to expansion and growth.
Conclusion:
Mindspace Business Parks has demonstrated remarkable growth and resilience in Q1 FY24, with substantial increases in key financial indicators such as gross leasing, in-place rents, and net operating income.
The company's strategic management of borrowing costs and efficient utilization of non-convertible debentures have further contributed to its strong financial position. As it continues to develop and expand its real estate portfolio, Mindspace Business Parks remains watchful of the evolving economic landscape to sustain its operational and financial success.
Mindspace has also received Platinum LEED O&M certification across 16 buildings in the portfolio. It recently released a second sustainability report for Mindspace Business Parks REIT.
