Q1 2027 Brookfield India REIT Earnings Call
Speaker #1: India Real Estate Trust does not guarantee such outcome nor undertake any obligation to update them. Any financial guidance or proforma information shared today represents management's estimate based on specific assumptions, and has not been audited, reviewed, or independently verified.
Speaker #1: We caution you against placing undue reliance on this information as there can be no assurance or achieving the result discussed. As a reminder, all participants line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Speaker #1: Should you need assistance during the conference call, please signal an operator. By pressing star, then zero on your touchdown phone. On the call, we have the following person: Mr. Ankur Gupta, non-executive director; Mr. Shashank Jen, CEO and management director; Mr. Rachit Kothari, non-executive director; Mr. Sakeet Gupta, head of finance of Brookprop, management services private limited; and Mr. Shalendra, Sabnani from Brookfield.
Speaker #1: I know I'm the conference over to the management for the opening remarks. Thank you, and over to you team.
Speaker #2: Thank you. Good morning, everyone. This is Shashank Gen here. A very warm welcome to Brookfield India Real Estate Trust Quarter 1 for fiscal 27 earnings call.
Speaker #2: Thank you to all our unit holders, analysts, and participants for joining us today for this call. Let me begin with a brief update on the macroeconomic and office market environment.
Speaker #2: India's economy continues to demonstrate resilience despite a volatile global backdrop. India's deep talent pool, comparative cost, digital ecosystem, and policy stability continues to enforce its position as a preferred destination for multinational companies and global capability centers.
Speaker #2: The India office market has carried its strong momentum into 2026. Industry data indicates that office absorption has reached a record 45-plus million square feet in the first half of calendar 26, which is an increase of approximately 10% year-on-year.
Speaker #2: GCCs accounted for roughly around 20 million square feet which is roughly about 43% of total leasing. Green certified buildings accounted for almost 73% of the leasing activity during the quarter, implying that the demand is increasingly focused on high quality sustainable and institutionally managed campuses.
Speaker #2: This market drop backdrop is actually directly aligned with the positioning of Brookfield India REIT as of June 30, 2026. Our portfolio comprises 32.6 million square feet across key gateway cities with a committed occupancy of around 93% in place rent of 104 rupees per square feet per month and a long-dated veil of 6.7 years.
Speaker #2: Our pan-India presence, high quality tenant roster, focus on sustainability, and concentration in established office micro market positions us well to capture continued demand from GCCs and other global occupiers.
Speaker #2: Let me now take you through our leasing and occupancy performance for the quarter. During the first quarter of fiscal 27, we completed 1.1 million square feet of gross leasing, comprising roughly about 700,000 square feet of new leasing and almost 400,000 square feet of renewable renewals.
Speaker #2: The average rent on gross leasing was 100 rupees per square feet per month, and the weighted average lease term was 9.8 years. The re-leasing spread achieved was about 14%.
Speaker #2: Leasing demand remained broad-based across product categories spanning SEC processing area, non-processing area, and IT and commercial spaces. GCC occupiers for us accounted for almost 39% of gross leasing during the quarter, supported by expansion demand from existing tenants such as Honeywell and KPMG Global Services.
Speaker #2: Tech services tenants also demonstrated strong commitment to our portfolio, contributing 63% of our quarterly renewals. With an healthy renewable tenure of approximately 11 years.
Speaker #2: Despite more than a million square feet of expiry during the quarter, we maintained portfolio committed occupancy of 93%, which is 4% points higher year-on-year.
Speaker #2: We continue to proactively address future expirys. During the quarter, we secured an early renewal of approximately 565,000 square feet with Bharti Airtel at the Airtel Center, representing around 80% of campus's gross leasable area.
Speaker #2: The renewal was completed of approximately 2 years ahead of expiry for a 9-year lease term, and a 5-year lock-in on majority of the renewed area.
Speaker #2: Including the commitment secured previously, we now have de-risked approximately 1.3 million square feet of our future expiry across the remaining 9 months of fiscal 27, as well as full-year fiscal 28.
Speaker #2: This proactive approach provides greater cash flow visibility, reinforces the strength of our tenant stickiness in the portfolio. Our expiry profile also remains well-staggard, with only 8% of gross rentals due for expiry during the remaining 9 months of financial year 27, and approximately 33% cumulatively through up to financial year 30.
Speaker #2: Let me also then talk about the acquisition that we announced during the quarter. We signed a binding agreement to acquire 264,000 square feet front office property, comprising 3 contiguous floors in Godrej BKC, a landmark grade A building located in the central business district of Mumbai.
Speaker #2: The proposed acquisition is being undertaken in a 50/50 partnership with NCW Prime Offices Fund, a part of Novama Group. The asset is leased to front office blue chip tenants with high occupancy and an almost 6.9 years veil, and 82% of leased area under lock-in.
Speaker #2: The acquisition price is rupees 1,700 crores on a 100% basis, implying a 4% discount to GAV, and a cap rate of 7.4% basis FY 20 estimates, 28 estimates, and almost 8.1% cap rate basis FY 30 estimates.
Speaker #2: Now, in terms of our further growth opportunity, we have a robust sponsor group pipeline. A couple of high-quality assets approaching stabilization in the sponsor group portfolio are Waterstones Campus, a 9-acre mixed-use campus in Mumbai's airport business district, it has 1.4 million square feet GLA of office space, 48 ultra-premium service department service residences, and a 3-acre exclusive members-only club.
Speaker #2: The second one is in Pune, Blue Grace Business Bluegrass Business Park, a 2 million square feet GLA in Pune with Tower One, which is fully leased, and Tower Two, which is under construction and 50% pre-leased.
Speaker #2: In addition to inorganic opportunities, the portfolio has meaningfully embedded organic growth potential of approximately 15%, which excludes contracted rent growth and mark-to-market gains. Moving on, on our focus on ESG and sustainability, sustainability remains deeply embedded in our operating philosophy.
Speaker #2: Very pleased to share that during the quarter, Walmart New Delhi achieved the IGBC Green Existing Building Platinum rating, our campuses at N1 and N2 received edge advanced certification, and Walmart Gurgaon and Pavilion Mark received edge certification from International Finance Corporation.
Speaker #2: With that, I'll hand it over to Saqir to take you through the financial performance for the quarter. Saqir.
Speaker #3: Thank you, Shishant, and good morning, everyone. Let me now take you through the financial highlights for Q1 27. Operating lease rentals for the quarter was rupees 7.14 billion, representing growth of 56% year-on-year.
Speaker #3: Supported by contributions from Ecoworld and SameStore Growth across the portfolio. Net operating income was rupees 7.57 billion, reflecting growth of 51.7% year-on-year. SameStore NOI increased by approximately 8%, driven primarily by lease of vacant area, mark-to-market gains, and contractual rent escalation.
Speaker #3: For Q1 FY 27, we declared distribution of rupees 5.6 per unit. Total distribution for the quarter stood at rupees 4.6 billion. Our balance sheet remains robust and well-positioned to support future growth in a disciplined manner.
Speaker #3: As of June 30, 26, our LTV excluding shareholder instrument stood at 25.9%. On a performance basis, after the proposed acquisition in BKC, we have a drive order of approximately rupees 43 billion at a 35% LTV threshold to support future growth opportunities.
Speaker #3: We continue to maintain dual AAA stable credit rating from Chrysler and ICRA. Our average interest rate remains at 7.3%, supported by a long-dated debt maturity profile, and limited non-term amortization.
Speaker #3: With that, I would now request the moderator to open the floor for questions.
Speaker #2: Thank you, Saqir sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone.
Speaker #2: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
Speaker #2: Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question come from the line of Karan Khanna with Ambit Capital.
Speaker #2: Please go ahead.
Speaker #4: Yeah, hi. Thanks for taking my questions. My first question to you, Shashank, given this is your first earnings call as the CEO, you're taking over a platform that has built significant scale, strong occupancy, and a sizable development and acquisition pipeline.
Speaker #4: Given your background across real estate, private equity, and M&A, what are the tools we strategic priorities you want to put your stamp on over the next 12 to 14 months?
Speaker #4: And in particular, do you see the next phase of Barrett's growth being driven more by organic portfolio optimization and development, or by accelerating acquisitions and expanding the platform?
Speaker #2: Thank you, Karan. And thank you for asking this question. It's a privilege and honor for me to be taking over this position. A platform that we are also proud of, first institutionally managed 100% institutionally managed platform.
Speaker #2: I think we are at a point of time which we are well poised for growth, and we have opportunities virtually across the portfolio. As I mentioned, we have a very robust sponsor pipeline that we would continue to look for and participate in the process as and when that comes up.
Speaker #2: We would also be open for looking at acquisitions outside the sponsor portfolio as and when there is an opportunity. We'll continue to remain a disciplined investor.
Speaker #2: As far as the existing portfolio is concerned, you're right, we are looking at optimizing our portfolio both in terms of our tenant profiles, occupancy, as well as any potential development opportunities within the portfolio that we have.
Speaker #2: So all in all, yes, we would be looking at a portfolio of growth from various potential available opportunities, both organically and inorganically.
Speaker #4: Sure. And then secondly, Shashank, if you look at GCCs, that remain a major structural driver for the office market. But they accounted for 39% of Q1 leasing versus roughly 50% in Q4 and FY 26.
Speaker #4: While technology services accounted for 63% of the Q1 renewals. So from your conversation with Occupiers, are you seeing the next leg of demand broadening meaningfully beyond traditional technology and GCC users?
Speaker #4: And looking three to five years out, how are you thinking about AI-driven productivity gains affecting the quantum of office space companies ultimately need?
Speaker #2: Yeah, good question, Karan. Thank you. So bases are conversations with our tenant partners and broader ecosystem in the industry. I think there are two, three elements that's coming in.
Speaker #2: One, we continue to see influx and robust demand from GCCs coming in. Now there could be a few basis points here and there on a quarter and quarter basis.
Speaker #2: But the long-term story of India being a very attractive talent pool and hence attracting a lot of multinationals to set up their capability centers remain intact.
Speaker #2: And we do want to continue to partner with them in their growth journey. That's one. As far as the broader tech services is concerned, as you mentioned, over 60% of renewables I mean, the tech services continued with their renewals.
Speaker #2: Bases are conversations. There are a couple of things. One, in the near to short-term or mid-term, we do not see AI impacting our clients or tenants' decisions on occupancy as such.
Speaker #2: Like any other technology evolution, we expect all the companies to evolve themselves. And in fact, use India as the AI talent hub increasingly. With that backdrop, we don't really see in the short to medium term any immediate impact or significant impact of AI disrupting the our growth plans or growth plans of our tenants in a material way.
Speaker #4: Sure. And then lastly, on the BKC acquisition, the roughly Barrett's share at 50% is about 8.5 billion. So what is the expected DP increase in for Barrett owing to the acquisition of the three floors at Goodrich BKC?
Speaker #2: So our for the GBKC acquisition, our assessment is it's going to be a DPU accretive acquisition. The DPU yield is expected to be about 7.1%, which is healthier than that at our portfolio level.
Speaker #2: So going forward in the, let's say, next 12 months or next full year, as we said, we see this to be an overall DPU accretive transaction or acquisition for us.
Speaker #4: Great. That's it from my side. Thank you and all the best.
Speaker #2: Thank you.
Speaker #3: Thank you. Anish, question come from the line of Pritesh with Access Capital. Please go ahead.
Speaker #5: Yeah, thanks for the opportunity, and few questions from my side. Firstly, on the cash balance that we have, I know some of this would be utilized to pay for the BKC acquisition.
Speaker #5: But how are we going to utilize the balance? Any plans for debt repayment, or you would still hold on to it considering that there are a couple of sponsor acquisition opportunities which are coming due?
Speaker #5: So what's the strategy on that?
Speaker #2: So we will continue to evaluate the optimal use of cash that we have, and it's going to be a combination of any potential short-term strategy of debt repayment across various SPVs that we are in the process of evaluating.
Speaker #2: And also at the same time, as and when we get clarity on the timeline that the sponsors would look at in terms of initiating the process.
Speaker #2: So we'll sort of balance out the utilization of cash basis these two strategies.
Speaker #5: Sure. So if you can guide us in near-term, how should we think about it? Because, I mean, holding cash would obviously not help our DPU growth in that sense.
Speaker #5: So paying off debt would enhance the deal potential. So how should we look at that?
Speaker #2: So yes, definitely we would be looking at paring down some debt in the near term. We are, as I mentioned, in the process of evaluating which line of credit should we look at across various SPVs.
Speaker #2: As I said, that would also depend on some guidance and clarification that we get from sponsor group on the timelines when they expect to launch the process for some of the sponsor assets that we've mentioned.
Speaker #2: Pending that, as I said, we are in the process of evaluating on a short-term basis which line of credit to be sort of prepaid as we speak.
Speaker #5: Got it. Got it. That's helpful. That's helpful.
Speaker #6: I'll just come in here. Good morning, everybody. From a sponsor side, there's a very large portfolio of the highest quality assets in the country that we are that we have.
Speaker #6: While in the near term, yield or yield protection or yield enhancement can happen with decrease or slight decrease in debt levels, I would say that these opportunities in India on a total return basis are in the mid to high teens, just like the GBKC acquisition that we've just announced.
Speaker #6: So on a total return basis, given our LTV is 25% or thereabouts, there is significant headroom to increase the size of the portfolio while keeping leverage levels below 35% on a portfolio basis, which has been our stated strategy that we like to be one-third, two-thirds on debt to equity basis.
Speaker #6: And the fact that we've demonstrated an ability to raise capital from the markets for amazing transactions. I would say that the guidance from our side is growth than just debt levels being the lower from this point onwards.
Speaker #6: Two transactions were highlighted besides the GBKC transaction, the one that we are just completing the lease-up in Andheri and amazing development, as well as a CBD asset that we've developed in Pune and continue to stabilize.
Speaker #6: Again, those are two examples. There are several assets of that nature. And as Ashanth mentioned, there are also amazing opportunities across non-sponsor assets as well.
Speaker #6: So I would say that the guidance I can provide from our perspective is the is total return which includes NAV enhancement, distribution growth, as well as yield enhancement.
Speaker #3: Thank you. Anish, question come from the line of Yashas Gilganchi with BOB Capital Market Limited. Please go ahead.
Speaker #4: Good morning, team. Thank you for taking my questions. When do you expect to conclude the acquisition of the GBKC asset? And since CapRates are being calculated on the NOI of FY28 and 29, is it right to assume that the rents from the new property are likely to start flowing in sometime in FY28?
Speaker #2: Yeah. So we are looking at closing the transaction somewhere by the end of next month. As we mentioned, it's a significantly leased asset, and we expect by closing it to be 100% leased up.
Speaker #2: And you're right. The rent should start on a 100% basis in the next fiscal year.
Speaker #4: Got it. Now, with 90% of your outstanding debt referencing floating rates, and given the volatile macro environment, what are your thoughts on how interest expenses are likely to evolve over the near future?
Speaker #4: And also, are you considering any measure to control for the volatility in interest expense?
Speaker #6: Yeah. So look, our debt is almost 90% of our debt is floating, but bulk of it is linked to repo rates, right? And any volatility in repo rates is what will cause I would say any movement in the interest expenses.
Speaker #6: In fact, if you think about it, our interest rate stack ranges anywhere between sub-7 rates to mid-7 rates today. Averaging about 7.3%. So we don't expect that there will be out-of-turn volatility in these rates unless the central bank moves the repo.
Speaker #6: But at the same time, we continue to evaluate fixed rate structures we, in fact, did a bond not-too-long back. And the idea would be as we think of the next phase of growth and next acquisitions, and we re-level this rate fixed rate bonds will continue to be a big source of consideration for us to finance the future growth from this point onwards.
Speaker #4: Got it. That's fair. And just lastly, releasing spreads have been trending downwards. Actually, since 1Q26, even as larger volume of space is being released, what is happening and how do you think spreads are likely to trend over the long term?
Speaker #2: If we see a history generally, the releasing spreads that we have managed to achieve over the last three fiscals have been in the zip code of anywhere between 15% to 20%.
Speaker #2: And on an average, about 10% of our area churns every year about 50, 60 percent of which we managed to renew, 30, 40 percent churns out and we get new tenants in.
Speaker #2: I think it will look to be very similar. As we go along, so we will continue to have that 15 to 20 percent flip on 10% of area.
Speaker #2: So additional percentage point to 2 percentage points of growth every year. On a steady state basis. So we don't expect that the forward projection for this will be any different than what we have seen in the last three fiscals.
Speaker #4: Got it. Thank you very much. Have a nice day.
Speaker #3: Thank you. Anish, question come from the line of Kunal with Bank of America. Please go ahead.
Speaker #5: Great. Thank you. A couple of questions from my side. The first one, given the 60% renewal you were highlighting, has happened on the IT services side.
Speaker #5: Do you see any difference in the commercial attractiveness of renewal deals with IT services in comparison with the GCCs? Wonder if there's a delta in terms of either the mark-to-market uplift you can get the tenure that they signed for, or maybe the expansion potential that they indicate.
Speaker #2: Yeah. So we continue to evaluate each transaction basis the micro market and our campuses. When it comes to GCC or tech services, I think the approach is no different.
Speaker #2: We approach it and equally all our clients approach it with the same commercial bent of mind, considering various factors of their existing presence, concentration, potential to expand in the same campus or the same micro market.
Speaker #2: And the trending rates in the micro market and the mark-to-market potentials. I mean, if you look at some of our large renewables that we've had, like Accenture, etc., I think it's been a healthy commitment that we've got from them.
Speaker #5: Understood. Specifically on MTM conversion, do you think that there's any bit of better or the overall approach you were highlighting, it takes care of it?
Speaker #6: So Kunal, I'll just give you an example, and we actually did cover it the last quarter, but maybe I'll just use that to guide this conversation.
Speaker #6: One of the largest tech services companies actually took up expansion space with us in Noida. Almost tripling their footprint. Right? And on that and the way it came about was their own manpower planning with a decent 10-year term and a 5-year lock-in.
Speaker #6: But the rates on that, to answer your question very specifically, we managed to get a 25% mark-to-market. So I think the outcome is fairly market, even when we're talking to tech services in many of these take-ups.
Speaker #6: Of course, renewals can be slightly different from new take-ups, but again, the outcome that they're solving for is a market trend, just given vacancy in many of these markets is now single digit.
Speaker #6: Certainly in the ones that we operate in, anybody who wants to be present there has to pay the market rent, and that's the trend.
Speaker #6: For the past few examples that we have. And that's just structured to add on to in so many ways, you've seen a little bit of waking up of tech companies and putting out their messages even more clearly.
Speaker #6: Certainly, playing on the front foot as to what changes in the AI-based economy or whatever the promise of AI in terms of efficiency means for these companies.
Speaker #6: So we expect that these companies will actually be a little bit more forward-thinking in fact the questions four years ago used to be, will IT companies continue to support rentals or will they have too much bargaining power, etc.
Speaker #6: I think that equilibrium is now reached where a significant majority of new leases are being considered by a wider variety of companies. The other aspect is so one is that IT companies will be more nimble.
Speaker #6: They will have to scale up or they are scaling up in their delivery models, etc., which means higher quality talent, higher quality spaces as a result of that.
Speaker #6: And second, the line between services delivery and headquarters is blurring. GCC is the perfect example. They're global delivery centers. They are no longer outsourcing offices, etc.
Speaker #6: And as a result of all of that, you would find that higher quality spaces, better quality landlords, better locations, better connectivity, rentals will become a rentals or whatever the implied rentals are, are going to be only one factor.
Speaker #6: Now, again, we have the best quality portfolio, and that offers very, very well for our type of real estate ownership.
Speaker #5: Understood. Very clear answer. My second question I'm going to again, this is sort of going back to the three aspects of what you look at in terms of driving the return for you as you look to deploy the remaining dry powder on the balance sheet.
Speaker #5: The question was more around given that the overall market trends have moved up, interest rates have done what it is, how do you think your forward return expectations from M&A that you might have in the five start to differ from what you have done in the last two to three years?
Speaker #6: I would say that on the M&A side, as has been the trend, majority of M&A will be focused on built assets. In our experience, India is a supply-side problem, not a demand-side problem, which means if we can continue to acquire high-quality assets, on a total return basis, these assets will continue to outperform the market, which means whether we showed 15% total return, usually if we buy the highest quality assets and manage them very well, they'll outperform.
Speaker #6: And beating the market cost of capital consistently with performance is what we have set out to do. I don't think that our current pipeline and our future projections should look very different.
Speaker #6: In fact, we've outperformed virtually in every acquisition that we've done in the past. And I think with the occupancy levels now in the '90s, those assets that we bought will do even better.
Speaker #6: So Kunal, if I can answer your question, I think if we are doing something good, then repeating that and doing it slightly better is the way to proceed.
Speaker #5: Understood. Just maybe just one more nuance on that. Do you set yours for yourself a minimum return hurdle in that sense?
Speaker #6: Absolutely do. Minimum return is beating our cost of capital, which you guys have for us, to be honest. Or certainly the valuers do. And in all the acquisitions we've tried to better that in terms of it being better than the cost of capital.
Speaker #6: And on a return basis, being accretive on an NAV basis as well as on a DPU basis. So I think they have very simple benchmarks that we've tried to follow as guide rails.
Speaker #6: As I said, it's not a complicated business. We're not spitting atoms here. So if we can do the basics right and repeat and do it slightly better every year, we'll do very, very well overall.
Speaker #5: Yeah. Perfect. All right. Thank you so much.
Speaker #1: Thank you. Our next question comes from the line of Nilesh Doshi with Prospero Tree AMC. Please go ahead.
Speaker #4: Thanks for the opportunity, sir. Sir, distribution is one of the criteria to remain invested in any REIT. So I would like to know at what rate our distribution is likely to increase in the coming years as our lease agreements mostly contain the 5% increment every year or 15% at the end of the three years.
Speaker #4: In addition agreements are generally executed at a higher rate than the expiring rate. And every year we are increasing the economy occupancy so I think our distribution must be increased by more than 5%.
Speaker #4: Is it my correct understanding? Please, your view.
Speaker #5: Thank you, Nilesh. As we have given in our guidance, we are looking at to be specific a 15% embedded growth in our DPU from the current portfolio that we have as and when it stabilizes.
Speaker #5: And we are at about 93% occupancy we've given a guidance of 96, 97%. For some of the assets that we have or we have acquired, once they are fully leased and the lease up happens, we are looking at a 15% growth give and take our sense is it'll take about two years on an as-is basis.
Speaker #5: So to answer your question, yes, that there'll be a more than 5% increase. Because at current sorry, sorry.
Speaker #6: Same quarter last year, we distributed five rupees 25 paise we are distributing five rupees 60 paise now. That's a 7% growth. Over the same quarter, last 12 months, right?
Speaker #6: So that should be the trend. I mean, if your income grows at five to six percent, you should be able to drive DPU by seven to eight percent in addition to the yield.
Speaker #5: Because when you say the total return is around 14, 15 percent, and our current yield is around 6%. So 9% by the capital allocation, is it like that?
Speaker #6: Yeah, I mean, so when we say 15 to 16 percent, that's for the asset-level return under the REIT. What reflects in the stock price is a function of the markets as well and the larger interest rate regime.
Speaker #6: But again, broadly speaking, if a product starts at six and a half to seven percent yield, right, on an equity basis, and has five to six percent top-line growth with leverage that should translate to about seven to eight percent bottom-line growth.
Speaker #6: So if you add seven to eight percent to a seven percent yield, you would emerge at a 14 to 15 percent return. I don't know if that answers the question.
Speaker #5: Yes, yes, yes. Mostly. And sir, last question. What is the economic occupancy? Because you mentioned that 93% is the committed occupancy, but there is a difference between the committed and rent-generating occupancy.
Speaker #5: So what is our actual rent-generating occupancy?
Speaker #6: So typically, you will see a delta of three to four percent. Our rent-generating occupancy should be about 89 to 90 percent.
Speaker #5: And we are at 88, 89 percent?
Speaker #6: We are at 89. That's what I said. Rent-generating is about 89, 90 percent.
Speaker #5: Thank you. Thank you. That's all from my side. Thank you very much, sir.
Speaker #6: Thank you.
Speaker #1: Thank you. Next question comes from the line of Rigved Bhogarikar with Neovelt. Please go ahead.
Speaker #7: Sir, two questions from my side. Number one, what's the dividend mix in the entire distribution going ahead? And amongst the dividend, what would be the rough split of dividend coming from old and new regime?
Speaker #7: And what would be the impact considering the recent changes that we are anticipating? And the second is, in general, I have seen that Brookfield is doing a JV kind of an investment, right?
Speaker #7: Be it the earlier Delhi portfolio or the current investment. So why is it so that we are going for JV kind of investment whereas other REITs are in general trying to acquire the entire asset wanted to know the thought process?
Speaker #5: Sure, Rigved. Your question has three parts. Let me take all the parts one by one. So our current dividend distribution percentage is about 17% out of the total DPU.
Speaker #5: With some of the corporate actions we are looking at, at a few SPV levels, and we're looking at capital structure and an overall basis, we expect that to increase to, I would say, early 20s.
Speaker #5: And then the second part of your question is the impact of tax legislations around some of the tax benefits that have come in. Again, it has got two, three elements which we are currently in the process of working out the exact impact.
Speaker #5: One is obviously the historical mat credit write-backs. The other is the tax rate change. We, as you know, we were in the old regime.
Speaker #5: Ranging from a 29 to 34, 35 percent, which will in the new regime will be 28 plus. And the third component of that is no mat liability going forward.
Speaker #5: So we are as we speak, we are in the process of working out the exact impact. Which we'll come back to the broader group in due course once we've sort of worked out the math around it.
Speaker #5: And the third element you asked for, and a joint venture approach there. As a as REIT, as buyer of these assets, I can tell you we participated in a formal process that the sellers embarked upon.
Speaker #5: For example, for DBKC, we were amongst the top shortlisted bidders. And so was Nuwama, who we decided to partner with therefore because we were ballpark in the same range.
Speaker #5: That also demonstrates our willingness and our ability to partner with the broader ecosystem in the market. Whether it's Nuwama or whether it's other such players, we do believe in benefits of strategic relationships with wealth channels and coverage channels like Nuwama.
Speaker #5: And we will continue to be a disciplined investor where we can maximize the returns for our investors.
Speaker #6: And on the mat tax point, I'll just add that by the virtue of the fact that we have traditionally went after larger real estate and larger campuses, most of them are at the scale of anywhere between two and a half to four million square feet.
Speaker #6: Which kind of means that our revenue in each of these SPVs is more than 400 crores. So the old tax system versus new tax regime has an 8 percentage point savings on the tax itself.
Speaker #6: Which is a big, big flow-through straight up to number one, to the direct savings to the SPVs that will distribute. But also, it'll improve the dividends and the pat as a result of that.
Speaker #6: So overall, I think it's going to be a positive we will quantify it at our end, understand this in a little bit more detail, and maybe next quarter you'll have a full-level disclosure, a full disclosure from us around what it means for our REIT in specific.
Speaker #6: In addition to the points that Shashank mentioned on no mat liability going forward.
Speaker #7: Got it, sir. Just a follow-up on this. If let's say I were to break up the total entire JV of the buyer REIT into old and new tax regime, so how much would this breakup be roughly?
Speaker #6: Everything today is old tax regime. Everything will move into the new tax regime if the mathematics make sense.
Speaker #7: Okay, got it. Thank you.
Speaker #1: Thank you. Our next question comes from the line of Anush Apadhyay with investor capital services India Private Limited. Please go ahead.
Speaker #8: Hey, hi. Thanks for the opportunity, sir. Just to check on the occupancy side, anyway, our portfolio stands at a very strong 93%. Just to get a sense how exactly we plan to move from here.
Speaker #8: Especially on the G1 and G2 portfolio, where we'll still have a scope of scaling up the occupancy. And considering the fact that G1 have close to around close to two and a half to three lakh of lease area set for expire over next one or two years.
Speaker #8: So how things are placed over there.
Speaker #5: Yeah, before I answer this specific question, Anush, I do want to clarify on the previous question that while we are talking about the change in tax regime and how does it benefit us, just a caveat that as we understand, it has not yet been legislated.
Speaker #5: It's going through the process by the legislation for various approvals. So just wanted to call that out, the subject to the final rules that are approved and come up, is where the exact impact by us would be.
Speaker #5: Understood and quantified. So just wanted to call that out so that there's no confusion. Now, coming to your specific question, yes, there are a couple of assets specifically G1 and G2 which relatively are slightly lower in occupancy.
Speaker #5: We are if you see directionally how G1 has scaled up, we have crossed 90 plus. It's almost at about 91% occupancy. I think we are benefiting for from two elements.
Speaker #5: One, there aren't such wide campus format assets in the micro market which are easily available. And hence, with continue to attract our customers and tenants there.
Speaker #5: And we continue to see a fair bit of expansion request coming in from our existing tenants in both these parks. So we do plan to leverage that and ensure that the occupancies inches up closer to the portfolio averages.
Speaker #5: Over the next three, four quarters. And that should help us bring in the average occupancies further up.
Speaker #8: So this would largely be driven from the existing player within the same premise, sir? Or we have some new players also coming in? Like we have this Global Home in the current quarter.
Speaker #8: That is Q1. So are we seeing attraction from other players as well?
Speaker #5: So while a significant portion of demand is getting generated as expansion strategies from our existing tenants, but we do have a fair bit of pipeline from new potentially new clients and new tenants.
Speaker #5: So while the larger tilt is towards the existing tenants looking for expansion, but the new tenant pipeline is also fairly healthy for us.
Speaker #6: I'll give you an example. What is back we signed up a large domestic automobile company who actually consolidated from four properties into G2. That was about a 250,000 square feet requirement with some expansion option attached to it.
Speaker #6: We expect that going forward, similar demand can come from other quarters because as it stands, the asset sits in a 30 million square feet micro market.
Speaker #6: Which means there's 10 times more space outside the premises than it is inside. And there can be a lot of occupiers who can potentially look to consolidate into benefits of having a single building.
Speaker #6: Which is only on offer in an asset like ours today.
Speaker #8: Thanks, sir. That's helpful.
Speaker #1: Thank you. Next question comes from the line of Pritesh with access capital. Please go ahead. Please proceed ahead with the question.
Speaker #8: Yeah, yeah. Thanks for the opportunity. Just a couple of follow-ups. Firstly, a couple of clarifications on the NDCS side. So this quarter, we had sharp jump in distribution to RICO entities.
Speaker #8: Just wanted to get no reason on that. Is it something which would be a new normal or some one of this quarter? And in terms of SPV cash utilization, I think last quarter we mentioned that we do have 50, 60 crore worth of cash which is still pending to be utilized and we'll utilize.
Speaker #8: That amount that remains unchanged or is there some increase there? And would that be largely utilized this year? So yeah, those two questions on the NDCS side.
Speaker #6: So I think I'll take the second question first. Yes, last quarter we talked about surplus cash which was in the range of 55, 60 CR.
Speaker #6: We did utilize some portion of it for this particular quarter. And the balance one left is about 35 to 40 CR. But I just wanted to mention that when we do a new acquisition, then sometimes we get new line of surplus cash as well as opening balance.
Speaker #6: So this is a moving factor which we have to consider as we do more acquisitions. And on your first question, what's changed between the last quarter and this quarter is we have got a new partner with the 361.
Speaker #6: It's their share of distribution that is clapped in the line item that you're seeing. So it's not that RECO has jumped a lot. It's just that there's one more partner getting this share of distribution from the REIT.
Speaker #8: Oh, yes, you're right. Yeah. Okay, perfect. And just on Ecoworld campus three, any update there in terms of are we going for refurbishment or redevelopment?
Speaker #8: Because I think August is when the tenant leaves. So just an update on that. Yeah.
Speaker #5: Sure. So as we speak, discussions are underway with the tenant for timelines on vacating the premises. And basis that, the exact timelines, we will also work out our plan of action for the building.
Speaker #5: And we'll come back to the group once we have full clarity on it.
Speaker #8: All right, fair enough. Those were my questions. Thank you and all the best.
Speaker #5: Thank you.
Speaker #1: Thank you. Our next question comes from the line of Gurv Goyal with Kotex Securities. Please go ahead.
Speaker #8: Yeah. Good afternoon, team. So my question is more regarding the growth aspect. While we see a lot of inorganic growth happening in the REIT through sponsored asset acquisitions, but for most of the other REITs, we see a large part of growth also coming in through development potential.
Speaker #8: In this REIT, as we all know, the large part of the development potential lies in the Kolkata asset. So what is the outlook on Kolkata as a micro market with all the changes that have happened?
Speaker #8: And how's the rental as well as the overall market looking on that front? And do you plan to sort of start under construction, sort of construct assets on those lines?
Speaker #5: Yeah. All right. So I'll take it in two parts. One, as you know, part of the development potential in Kolkata is our project called Baytown.
Speaker #5: I think that's about 0.6 million square feet. I think that should go live in the next couple of quarters, two to three quarters. We would soon be starting to market that particular project or asset in Kolkata, which is in the same premises or adjoining piece of land.
Speaker #5: As far as the broader potential in Kolkata is concerned, we are closely watching the situation as it unfolds. There is a general optimism that the industry has shown us.
Speaker #5: Bases are various conversations. We do expect things to become clearer on ground in the next few quarters. But we're closely watching the sentiments as they unfold.
Speaker #5: And we'll basis that decide the next course of action.
Speaker #8: Understood. And just another question. In terms of the Gotrade asset that you are acquiring, generally in Mumbai, the most of the agreements are signed for five years.
Speaker #8: I see the real in and around 6.9. What could be the rational behind this?
Speaker #6: Many of the tenants who took up space actually went under the longer route and paid full stamp duty. Including some of the names as State Bank, Brookfield, and World Bank.
Speaker #6: So these tenants are given the nature of the fit-outs they do. They of course want to be sticky. They don't want to reinvest in their fit-outs.
Speaker #6: And generally like to secure a longer tenure. That's why in spaces like DKC, you would see more leases than licenses.
Speaker #8: Understood. Thanks. That's all from me.
Speaker #1: Thank you. Ladies and gentlemen, anyone who wishes to ask a question, may press star and one. Our next question comes from the line of the data is the way with somewhat financial services LLP.
Speaker #1: Please go ahead.
Speaker #7: Yeah, can you hear me?
Speaker #1: Yes, sir, we can hear you.
Speaker #7: Okay. So my question is basically if we look at generally all the risks which have been listed, probably this is the best of the time where we see everything demand side, there is no issue.
Speaker #7: People are paying these rental agreements happening at higher quality building, at higher premium to market. And that information also been shared. So in our case, can you let us know what has been the premium or M2M expiry risk?
Speaker #7: I'm not just talking about the M2M kind of thing. Whether there was any kind of premium which we got as compared with the preliminary price in the last quarter or last one year, however it is.
Speaker #7: And whether you can.
Speaker #6: Is the question that are we getting mark-to-market spreads on our.
Speaker #7: I'm saying whether we are getting premium or mark-to-market. So let us say, is it expiring at 100? Mark-to-market is 120. Whether we are able to renew at 130, which is a 10 rupees premium to the ruling bank.
Speaker #6: I mean, to be honest, wherever you lease is the market. I mean, there's no concept of premium to market the way we see it.
Speaker #6: In fact, what you can do is outperform your last target. And then call it the new market rent. I don't think the market stays at 120 if you lease at 130.
Speaker #6: The moment you lease at 130, everything goes to 130. I think that's probably the right way to look at it. But I think more factually, we have consistently achieved 15 to 20 percent uptick on expiry rents as we have renewed spaces over the course of the last year.
Speaker #6: Including as recent as the last quarter. So we continue to we continue to clog that. There's, of course, a little bit of difference between the various markets.
Speaker #6: In Calcutta, we have seen rents go from 40 to almost now mid-60s. Over the course of last two years. And we continue to hit that rent in many of our leasing conversations and the renewal conversations.
Speaker #6: In markets like Mumbai, we have seen 8% year-over-year growth. Right? We may not have seen that much in Gurgaon. But Noida continues to be very close to inflation.
Speaker #6: So it's a mixed bag. But on an average, the beauty of having 32 million square feet is that it works like a diversified portfolio.
Speaker #6: And we continue to get almost 15 to 20 percent spreads. On the overall average.
Speaker #7: Thank you. So appreciate that. So the second part is why we are not able to achieve the all-time high distribution. My understanding, you have some kind of if you go 3 to 50 paisa, then you've got listed.
Speaker #7: There was some kind of cash flow which was available. But it's now almost like five years since we are listed. And we still not able to I'm just saying as a name and kind of a talking about we did acquisition.
Speaker #7: We did kind of thing. And all this DPU are aggressive. But still, I find my distribution was which was 6.5, which was highest, which we have achieved.
Speaker #7: And also I'm at 5 rupees 60 paisa. So what could go right? When should we expect distribution increase? All growth, etc. I appreciate. And we will get benefit.
Speaker #7: But I also want to see in organic growth also. Why we are not able to get that growth? That's because I find if I compare with peers, I see a significant improvement in that.
Speaker #7: Those guys are also acquiring and they are also growing. So is this something because of market in which we are operating or how you explain that?
Speaker #6: Look, I would can I this is Ankura. I would say two things. A lot of research is published where we are doing peer comparison or they do peer comparison.
Speaker #6: So it's a little bit not our place to be comparing ourselves to peers because I would say that our distributions have increased. All the.
Speaker #7: I'm sorry. If you look at your historical distribution, you have not reached your all-time high. That's what my simple question is. Five years are we are still not able to reach what we have given.
Speaker #7: And that time I understand you have some kind of cash flow and you were not paying on some dementia, etc. That's got hit you.
Speaker #7: So that part I understand. But the point is that when we will see that distribution or we are reaching all-time high, that's my limited point.
Speaker #6: You don't let me answer the questions and I think we can move to the next question. Sorry, moderator. We can move to the next question.
Speaker #1: Sure. Thank you. Our next question comes from the line of Nilesh Doshi with Prospero Tree AMC. Please go ahead.
Speaker #4: Thanks for the follow-up, sir. Sir, do we have any property in a location where the local authority has permitted the higher FSI? So we can increase our legible area by spending some money on a construction cost?
Speaker #6: It's a fair question. Look, FAR and FSI rules in India are getting I would say more modern. Most markets are allowing more density. Slightly technical.
Speaker #6: Even when FAR is allowed, because the coverage rules are such that you may not be able to consume them unless you break buildings. Some buildings have long-term leases.
Speaker #6: So we go through a portfolio optimization exercise every quarter, every year. To ensure that we are able to financially achieve the best outcome. In terms of creating more area, or utilizing the existing area better.
Speaker #6: But that's a fair question. And I think our large estates ultimately allow for those levels of opportunities coming through to us. But again, those will be sporadic.
Speaker #6: We are 94% leased. So it's not always easy for us to create densification in our existing parks. But across the board, we have opportunities.
Speaker #6: Just like there was a question around the campus 3 in Ecoworld. There is real opportunity where one's tenant lease. We can densify the site.
Speaker #6: Similarly, in some of our large assets in Gurgaon, there are opportunities for us to increase FAR. And we do it in a thoughtful and methodical manner.
Speaker #6: But it's a great observation.
Speaker #4: Okay. And sir, last question, if permit. Sir, where the direction is higher? Because the Mumbai, I think the Mumbai is the costliest real estate.
Speaker #4: So out of the other places, where the higher possibility of. Okay, sir.
Speaker #6: You know, land is expensive across the country, right? Like India is a place with the highest population density among the top 10 economies in the world.
Speaker #6: Compared to the US, we are 12x more dense. China, we are 3x more dense. So India is a pretty land-constrained country. Certainly, our cities have become mega cities.
Speaker #6: 20 million plus population. So across Mumbai, Bangalore, Delhi, even Kolkata, there's pressure on land. And we look for opportunities everywhere.
Speaker #4: Oh. Thank you, sir.
Speaker #1: Thank you. Our next question comes from the line of Janvi Shah with Share India Securities. Please go ahead.
Speaker #5: Hello. Thank you, sir, for letting me answer the question. So I know that you just gave clarifications on the old and new tax regime.
Speaker #5: But on that note, it says, I just wanted to know, how many of our SPVs are basically in that tax holiday at the moment?
Speaker #5: Because that will determine when they will move towards the new regime, right? So if you can give me some clarity on that.
Speaker #6: Hi. As we explained, one of the basic point of this is the taxability of DPU in the hands of unit holder. This is that all our SPVs were in the old regime.
Speaker #6: So from that perspective, what we are saying is if the DPU is going to become tax-free, all of them will move into the new regime.
Speaker #6: So it's a lift and shift from old to new for all the SPVs. And then one of the again, bigger factor is that there is going to be no mat, right?
Speaker #6: So that is also we want to follow for all the SPVs, right? So as we said in the previous answers, I think this is a big significant announcement for REIT as a whole.
Speaker #6: And we are doing kind of due diligence to come back with a number. But we are going to go in new regime for all the SPVs.
Speaker #5: Okay. I completely understand that. The movement to the new one will be more beneficial for everyone. Is this that I just wanted to understand on, let's say, because right now for SPVs which are, let's say, in the tax holiday, you will just have to pay the mat.
Speaker #5: And not the actual tax liabilities. So that will be a lot lower than the actual tax. So moving to the new one for the same will not make sense.
Speaker #6: Sorry, could you repeat your question?
Speaker #1: Participant has left the queue. Our next question comes from the line of Puneet with HSBC. Please go ahead.
Speaker #7: Yeah, hi. Thank you for the opportunity. My first question, sorry, I joined a bit late. So this is with respect to the condition that you allow.
Speaker #1: Puneet, I'm really sorry, but your voice is breaking. Can you check your network, please? Thank you.
Speaker #7: Can you hear me well now?
Speaker #1: Yes.
Speaker #7: Okay, great. Yeah, yeah. So thank you so much. And you might have answered this earlier. I joined a bit late. Can you talk about your thought process of acquiring a strata asset here?
Speaker #7: Three floors. How will, in long term, maintenance happen for this kind of asset? And why do it with NUAMA jointly? And lastly, on the NOI side, you talk about 12, 50 million as potential NOI.
Speaker #7: If you can just give some breakdown of that also to be very helpful.
Speaker #6: This is Ankur, would love to host you here. If you haven't been to our office. That will really bring this asset to your to the front of your mind space here, which would be great for us to demonstrate the quality of the asset, the location, et cetera.
Speaker #6: This really is a building within a building. We have a separate lobby entrance. This is a large floor plate. Two and a half, more than two and a half lakh square feet.
Speaker #6: On a value basis, this is more than a million square foot average of most of the markets in the country. Our rentals are four times of the average portfolio rentals.
Speaker #6: So you think about it in the context of a million square foot average asset, in the best location in Mumbai. And the best market in the country.
Speaker #6: So I think if you contextualize that, it will probably answer the question. Maintenance of the building, we have a say in that. We are part of the building condo.
Speaker #6: And the building is occupied by the highest quality tenants as well. So I think and we've been here for the last five years as Brookfield, both as an owner of this asset as well as an occupier.
Speaker #6: So it's a fantastic asset, the best in the country. And as Shashank mentioned earlier, in the bidding, Brookfield REIT and our partner here, emerged neck to neck.
Speaker #6: And it was only fair that both partners could come to an agreement. And acquire it jointly.
Speaker #7: So no doubt about the quality of building, but here, five, six years down the line, should one think of any potential risk of disputes on maintenance, et cetera?
Speaker #7: Or is there a separate contract that you have with the other existing owners, which insulate you from those sort of risk that we see in some of the other strata sold buildings?
Speaker #6: Compared to regular strata sold buildings, this is a highly institutionally owned between us and owner-occupiers on the other side. So I don't think that's a risk.
Speaker #6: There's always a risk in anything that we do. But massively managed here. And I'll just add that the building has been in existence for 12 years as performed at the same level, of course, must have seen the asset in the past as a very live I would say, very thriving F&B retail downstairs has continued to command the best tenants in all of BKC, the best rents in all of BKC.
Speaker #6: And that has all been under a condominium structure where, as Ankur said, there are four institutional large four large institutional owners between a large pharma company, another domestic fund slash developer, a big family office as well as Brookfield.
Speaker #6: So very like-minded people, and decisions typically happen very commercially in societies like these that are established in CBDs. So we don't see the challenge that you are talking about, at least we don't foresee it in the near future.
Speaker #6: But the other part of the other part of doing having an ownership like this is or having a stack like this is there will there can be potential opportunities to grow in the building.
Speaker #6: And consolidate in the building. Given there are four owners and I think having access to capital like the one that our REIT has access to would put us in a good spot as we think about growing in the building and consolidating more space as well.
Speaker #7: Understood. That's helpful. And on your NOI expectations for FY28, which is 1250, million, which is 1250 million, this is different from the what the valuers have given.
Speaker #7: Can you help understand what is the gap?
Speaker #6: Puneet, this is basically the gross NOI number from the valuation report that we have kind of captured. The 1250 number is the gross NOI number from the valuation report.
Speaker #7: From okay, great. That's all from my side. Thank you so much.
Speaker #1: Thank you so much. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks.
Speaker #1: Thank you. And over to you too.
Speaker #4: Thank you. Thank you, everyone, for taking time out. And participating in this call. We look forward to be in touch with you and continued interactions.
Speaker #4: Much appreciate your time there. Thank you so much. Have a good day.
Speaker #1: Thank you so much, sir. Ladies and gentlemen, on behalf of Brookfield India Real Estate Trust, that concludes today's conference. Thank you for joining us, and you may now disconnect your line.
