Ladies and gentlemen, good day, and welcome to Brookfield India Real Estate Trust Q4 FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode until the floor is open for questions. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this call is being recorded. On the call, we have the following persons: Mr. Ankur Gupta, Managing Partner, Brookfield Asset Management, and Director, Brookprop Management Services Private Limited; Mr. Alok Aggarwal, Chief Executive Officer and Managing Director, Brookprop Management Services Private Limited; Mr. Ankit Gupta, President, Brookfield Properties India; Mr. Amit Jain, Chief Financial Officer, Brookprop Management Services Private Limited; Mr. Rachit Kothari from Brookfield; Mr. Shailendra Sabhnani from Brookfield. I now hand the conference over to the management. Over to you, sir.
Good morning, everyone. On behalf of the Brookfield India Real Estate Trust, I extend a warm welcome to all participants joining us today for this conference call. At the outset, I would like to give a brief overview of the macro to India and the impact it has on the commercial office sector. India has emerged from the pandemic as one of the fastest growing large economies in the world. The Indian GDP is expected to grow at about 7%-8% annually, if not higher, over the next five years. This growth will be driven by increasing outsourcing to India, growing domestic demand, and the rapid proliferation and expansion of Global Capability Centers, which we call GCCs. These factors will lead India emerging as an office to the world, which will drive the demand for Grade A office assets.
Over the course of 2020 to 2023, we saw a lot of right sizing and rationalization of office spaces, despite significant hiring by tenants as they were adopting the work from home culture. This is visible across geographies, across property owners in our country. Our estates are now either fully back to office or have adopted hybrid strategies. The demand for office space to house all the employees that were hired over the course of the pandemic is picking up. Even though occupancy is not back to pre-COVID levels, yet we are experiencing a clear revival in leasing. We have also witnessed a massive influx of Global Capability Centers in India over the last few years due to attractive talent and cost structures that India has to offer.
In fact, till 2030, India is hoping to add about 100 GCCs every year, significantly adding to the existing base of approximately 600 GCCs present in India. The recently announced SEZ reforms have also come as a boon to property owners such as us, given that we have a high proportion of SEZ spaces in our portfolio. We are progressing well on our plan on conversion of SEZ spaces to non-processing areas, and are seeing a strong interest from occupiers for leasing such converted spaces. In addition, in addition to this, the fact that Indian economy is doing well is also driving up demand from domestic companies, and there too, the SEZ reforms are quite a positive development for a company like us.
All these factors are supporting the turnaround in the demand for office space, and Brookfield India REIT is well poised to cater to this demand. Coming to our performance in this quarter, I'm happy to report that we have achieved a third successive quarter of record new leasing since IPO at 0.9 million sq ft for this quarter. This includes a 0.3 million sq ft lease that we have signed at Kolkata, the leading Indian bank, for converted SEZ space. Additionally, we have signed a short-term lease with the same bank for more than 0.3 million sq ft, which is to be used as an incubation space for up to a year until their primary office space becomes operational. This short-term space is not included in the 0.9 million sq ft number.
So overall, if you see that number, is 1.2, 1.2 million sq ft in a way. We have achieved a new leasing of 0.7 million sq ft in our SEZ portfolio, which is almost 4 times our historical average, and speaks to the strong demand that we are seeing from our high quality campuses. The tenants that have been signed in the last quarter include the leading Indian bank that I just mentioned, Larsen & Toubro, Tech Mahindra, Concentrix, Teleperformance , R1 RCM, McDonald's, Dolphin Kids , and the Global Capability Centers, the Brookfield Group itself. With the new leasing of 0.9 million sq ft in last quarter, we have already achieved approximately 40% of our new leasing guidance of 2-2.4 million sq ft in FY 2025.
This gives us confidence that we are, we are well on track to meet and hopefully exceed our guidance. Our occupancy during the quarter has increased from 80% to 82%, and we hope we have bottomed out on that front in last two quarters. We have a relatively low scheduled expiry load in FY 2025, with only 0.4 million sq ft of expected exits and 0.6 million sq ft of expected renewals. Given that our leading guidance provided last quarter guides for a further new leasing of about 1-1.1 to 1.5 million sq ft this year, and with lower expiry load , we expect a continuous improvement in net leasing and expect occupancy to show substantial improvements over the course of the next twelve months.
We would like to highlight that our Calcutta asset is nearing stabilization, as it has achieved an occupancy of 95%. We also have seen strong demand in Calcutta market, something that we had alluded to earlier, and our Calcutta assets has reached an occupancy of 88%. In fact, it's currently at 98%, if we were to consider the short-term lease that we have signed up with leading Indian banks. We have more long-term demand in Calcutta, and we are synchronizing to ensure that when this short-term space gets vacated, we're able to tie up back-to-back with the long-term demand. For the fiscal year FY 2024, we achieved a gross leasing of 2.8 million sq ft, including 1.9 million sq ft of new leasing and 0.9 million sq ft of renewals.
The 1.9 million sq ft is the best annual new leasing we have achieved since our IPO, with substantial tenants, including existing tenants, capturing almost three-quarters of the new leasing demand. The gross leasing during FY 2024 was achieved at an average spread of 17%, which indicates that we are successfully able to achieve the intrinsic mark-to-market of our assets through new leasing and renewals. Our application for conversion of 1 million sq ft of SEZ area into non-SEZ area has received positive response from both SEZ authority as well as prospective tenants. We have already received in-principle approval for conversion of 1 million sq ft, and we are in process of applying for conversion of further, about 0.2 million sq ft.
As stated earlier, we have already signed a lease of 0.6 million sq ft converted space at Kolkata, split 50/50 between short-term and long-term space. We are in advanced stages of securing all necessary approvals for conversion of 0.6 million sq ft space in Kolkata, so that the new tenant can begin using the space. We have displayed strong operating growth, with our existing leases having delivered a 7.4% average escalation on 1.6 million sq ft during the quarter. In FY 2024, we have achieved an average escalation of 7.4% on 6.8 million sq ft. Our mixed-use commercial development at Kolkata is progressing well, and we have delivered and fully leased 75,000 sq ft area in downtown Mumbai during the last quarter.
Our high-quality portfolio has an embedded growth headroom of 16%, which we will realize through further leasing and growing physical occupancy, aiding margin recovery. We're also pleased to announce that we have signed binding agreements to acquire a 50% stake in dominant gateway properties in Delhi NCR from the Bharti Group. The portfolio is completely built and comprises 3.3 million sq ft of operating area and has an occupancy of 91%. It primarily comprises three large office assets, Worldmark Delhi, which is an iconic 1.5 million sq ft asset in Delhi's Airport District; Airtel Center, which is Airtel's 0.7 million sq ft corporate facility located in Gurugram CBD; and the Worldmark Gurugram, a 0.8 million sq ft mixed-use complex in Gurugram CBD.
The total equity consideration of INR 12.3 billion to the Bharti Group will be discharged through a preferential issue at INR 300 per unit, which is at 18.5% premium to the close price. With this, we will be welcoming the Bharti Group as cornerstone investor in Brookfield India REIT, with an 8.5% pro forma stake held by them. This acquisition will increase our consolidated GAV by 22% and our expected economic occupancy by 50 basis points. Our operating area will increase by 16% from 20.9 million sq ft currently to 24.2 million sq ft. The transaction has substantial diversification benefits and will reduce the top five tenant concentration to 24% from 30%, while increasing the share of commercial / non-IT park assets from 34% to 44%.
With this acquisition, we will welcome Bharti tenants such as Bharti Airtel, EY, Airbus, CDPQ, and SMBC into our portfolio. This acquisition is being done at a 7% discount to the GAV and is expected to lead to an NAV accretion of 0.9% and NDCF accretion of 1.1%. This acquisition and the preferential issue are subject to unitholder approval. The date of unitholder meeting is scheduled for June fourteenth, two thousand twenty-four. Post this acquisition, we continue to have access to approximately 25 million sq ft of the sponsor group's assets in key gateway cities in India, which provide a strong medium to long-term growth potential for our REIT. At this point, I would like to mention that Mr. Sanjeev Sharma, our ex-CFO, has moved on, and we thank him for his contribution.
I would like to introduce you to our new CFO, Mr. Amit Jain. Amit has been important member of our leadership team, and will be taking over responsibilities from Sanjeev, and has taken over responsibilities from Sanjeev. Amit has more than 20 years of experience in finance and operations, tax, regulatory affairs, fundraising, and investor relationships. In the past, he has worked with organizations like EY, IDFC Equity , and the Discovery Channel. With this, I would like to invite Amit to provide the financial update. Thank you.
Yeah. Thank you, Alok, and good morning, everyone. I'm pleased to be taking on this new role and would like to thank the board members and other members of the team. With that, let me jump into the earnings for the fourth quarter and full year of FY 2024. There has been a substantial growth in earnings this year, driven by acquisitions of Downtown Powai and Candor TechSpace G1. We have reported a growth of 91% in our operating lease rentals to INR 405 crores, compared to INR 211 crores in the same period last year, and the adjusted NOI grew by 89% to INR 461 crores, compared to INR 274 crores in Q4 of 2023.
For FY 2024, we have seen an increase of 55% in our operating lease rentals to INR 1,283 crore and a 57% increase in our adjusted NOI to INR 1,506 crore. The increase is primarily due to the acquisition of Downtown Powai and G1 to the portfolio, as well as our recent leasing performance and contractual escalations. Our gross asset value increased by 78% to INR 292 billion as of March 31, 2024, compared to INR 164 billion in March last year. Our NAV as on March 31, 2024, is INR 373 per unit. We have achieved an EBITDA of INR 205 crore this quarter, which translates to INR 4.66 per unit. We are declaring INR 4.75 per unit this quarter.
Our current adjusted NOI run rate on an annualized basis is INR 1,830 crores, and we continue to have significant organic potential of 16% in our portfolio, which can be achieved through the lease-up of vacant area and margin recovery. We had updated you earlier that we have filed schemes for capital efficiency in some of our. One of the scheme has been approved by NCLT in May 2024, while a few others are at various stages of processing at the NCLT. We hope that these schemes to get implemented at different points over the course of this calendar year. The different component of distribution should get announced significantly over the implementation of these schemes.
We continue to maintain a strong triple A rating from ICRA and CRISIL on the back of our strong balance sheet, a long-dated maturity profile, and limited refinancing and amortization over the next few years. A majority of our loans are linked to the repo rate, and we expect to benefit significantly as benchmark rates begin to trend lower. With that, I will request the moderator to hand us over here for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we wait for the moment while the question queue assembles. The first question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you so much. And welcome, Amit, and congratulations on decent numbers. My first question is if you can give some color on your new leasing pipeline, and what is the occupancy that you expect for end of FY 25?
Yeah. So, Puneet, thank you. Let me take the question. Puneet, if you really see our overall, leasing pipeline is about 3 million sq ft. You know, about 2 million sq ft is GCC and about 1 million sq ft for, domestic space . If you really see, we have said in last call also, and that's something we maintain, we hope that we should be able to lead, guidance of about, you know, about 2.4 million sq ft at pipeline.
Considering, you know, if we have about, you know, about approximately 0.4-0.5 million sq ft of vacancies, we should have about maybe additions about around about 1.6-1.8 million sq ft addition from last quarter. So we are hoping to cross 90% by FY 2025, financial year 2025, around 90%.
Okay, and will it be more back-ended leasing, or will it be evenly spread out through the years?
So gradually we keep increasing. If you, if you really see, we have gone up, you know, about 225 basis points last quarter. We're not considered that short-term lease. Short-term is also about a year. We're not considered that. We, we see gradually increase every quarter. That's. We're very confident about.
On the short-term lease, is there any chance of it getting converted into long-term? Second, are you also doing some CapEx for this short-term lease?
So, let me just answer the second question first. We are not doing any CapEx for this short-term lease. There is existing pre-let space available. We have provided that. There's a chance that it can get converted, but luckily we have more inquiries. We hopefully don't have to wait for getting it converted. We have more inquiries. We're just trying to ensure that as this space get vacated, we're able to tie up with this long-term inquiries. So there is enough and more demand, at least in Calcutta right now. It has really seen a big turnaround.
Okay. That's helpful. And secondly, on your acquisition, if you can just run us through, it was the EV that you guys have assigned to it is almost INR 6,000 crore. What is the debt that comes with this asset in your books?
I will request my colleague, Rachit, to take this one.
Yeah. Hi, Sunil. Rachit here. So, the debt that will come along on the books is about, the net debt will be about INR 3,100 crore.
Okay.
Yeah, I mean, that is, of course, the usual tenant deposits that will get taken over.
So, so essentially you are saying, 6,000 minus 31, so INR 2,900 crore is the equity value which is being assigned, but, you guys are saying essentially INR 1,230 crore for 50% stake. Is that how one should read it?
Yeah, I think beyond the INR 3,100 crores of net debt, there are, of course, deposits and other liabilities of, to the tune of about 300-odd crores. So you should look at Emaar value, you know, of about INR 2,500-INR 2,600 crores.
At a INR 6,000 crore asset valuation.
Okay. 2,000, so, okay. Understood. That's, that's very clear then. Yeah, thank you so much. That's all from my side.
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Yeah, hi, thank you for taking my question. Good morning to the team. Firstly, on, you know, the acquisition, so, you know, just trying to understand, I think Brookfield Parent acquired this asset, you know, couple of years back for INR 5,000 crore. And I think that transaction got completed last year. And now, you know, the valuer has put a valuation of INR 6,500 crore. So just wanted to, you know, understand what has been the incremental changes in this asset post, you know, Brookfield taking over. Is it just on the rentals or, you know, on the occupancy side as well, it was, you know, very low occupied when it was acquired, and now it has gone up to 91% committed occupancy. So just your input on that.
Yeah. So Rachit here again. If I can just point you to page 14 of our acquisition presentation. The property was about 75% occupied, when Brookfield Private Fund had signed up the deal, in 2022. It was a valuation for 2022. Right, the 75% occupancy number was at an INR 120 average rent, which has now become 91% occupied portfolio at an INR 140 average rent. So the NOI has actually gone from slightly below INR 400 crore, which it used to be two years back, to almost touching INR 500 crore right now. So, and that 25% uptick in NOI, is what has driven the valuation change.
Sure. And, you know, on capped calculation, you mentioned that, you know, it's at 97% occupancy in FY 2026. So you know, how confident are you about the leasing, you know, of this asset from here on?
So I'll request Alok to add, but, these properties have been occupied at those levels in the past, pre-COVID. If you were to look at asset by asset, you know, Airtel Center is almost 100% occupied today. Worldmark Delhi and Gurgaon are touching 90%. These are very high quality front office properties. There are many tenants who want to be in these properties. So there's a good amount of confidence that we will be able to take these up to 95%, which basically means the portfolio goes up to 97.5%. But I'll let Alok add on the leasing color as well.
Yeah, yeah. So if, if you really see, you know, Airtel Center is anyway 100% occupied. We've seen the occupancy for both, you know, Delhi and Gurgaon property moved as in past two years, we have seen it consistently moving up, and we have a, you know, strong pipeline for both of these assets. And we should be able to achieve the numbers we are predicting. We're very confident about that.
Sure. One on Kolkata. So I think a great turnaround there, and you had, have been highlighting about, you know, really strong leasing expected in Kolkata. You know, how, what is your outlook on the asset now? By when can we see that, you know, getting fully leased? You know, will the conversion of SEZ to non-SEZ be the key driver of, you know, that demand, or we are still seeing a very strong SEZ demand in, in Kolkata as well? And, and specifically, you know, since we are aiming for another, another 500-600 lakh sq ft, 500-600 thousand sq ft of conversion in that asset, so, you know, what's the outlook there?
So I think it's a good question, but I would say that turnaround in Calcutta, which has happened, and you know, we have moved from 70% to either you call it 88% or, you know, actually it's high 90s. That has happened for both reasons. We have seen a good SEZ demand, but the kicker has really come in signing off this non-SEZ space by Indian leading banks, which would not have taken you know, SEZ space. So both things have worked to the advantage. And we also have seen the rentals going up, especially for the non-SEZ space, they have crossed 50s, and we are also now you know, looking to push rentals there.
Having said that, you know, there's more than enough demand, and we are very confident that, we should, we should be able to achieve, you know, occupancy in terms of high 90s%.... We are very confident, you know, how to just tie up, so that whatever demand we have, so as and when this short-term space can vacate it, back to back we can tie it up. So that's something we are planning, we are working, and feel very confident and positive about able to take this asset to very high 90s%.
Sure. Sure, that's great to hear. Just lastly, on the, you know, conversion, so 1 million sq ft already converted. Is it just that, you know, Kolkata one is leased out, or we have seen any other progress in the converted space in terms of leasing? And, you know, your experience in terms of time, you know, taken for this conversion, you know, and, you know, how quickly we can convert the next 1.2 million sq ft that we are eyeing for?
Yeah. So one, for 1 million sq ft, we already have in-principle approval. Where Calcutta, we have applied for conversion of about 0.6 million, 0.6-0.65 million sq ft. That is expected to happen in next 10 days, I mean, and the final approval, last leg of approval, we are going to get in next 10 days. So other assets, probably it will take maybe 4-6 weeks. Our experience is, it takes about 2 months for getting the space converted. And as you know, we move ahead, this. But let's say 2 months, this time could be shortened in case there are tenants waiting. So that's where we are.
But just to add that other assets also, we have a strong demand for tenants who want large lease spaces, and we are working with these tenants to sign them up and parallelly take space for conversion. Once we see, once this 1.1 plus 1.2 million, 1.2 million gets leased, we can take more space. We want to take in, in, you know, kind of not all in one go, but 1.2, after 1.2 million, we'll go for the next round.
How much would be left after this 1.2? Another million sq ft, is it?
That will decide, depending on the demand, we will decide. We can convert 50% of, we can convert, but that will decide how much you want to convert.
Okay. Okay, okay. Thank you. That's it from my side. All the best.
Thank you. The next question is from the line of Parvez Kazi from Nuvama Wealth . Please go ahead.
Hi. Good morning, and thanks for taking my question. So congratulations for a good leading pipeline. So my question is now on the NOI and NDCF. Now that the leading pipeline picking up, do we see a scenario where, let's say, the working capital movement might turn to our advantage, and the impact on, let's say, the NDCF front could be higher than what the NOI growth could be for the similar set of leasing?
So we have already. See, if you see our deck, we're already saying that we are seeing 15% NOI growth we already are predicting. And that's something we'll keep that number out there. And as and when, of course, you know, as we move ahead and our leading numbers, occupancies move higher, we can revise these numbers, but as of now, we are predicting a 16% increase in NOI. In terms of NDCF, we already have said that, you know, for next another two quarters, we are hoping to distribute about INR 4.5-INR 4.75, and after two quarters, we'll give you the numbers.
Sure, sir. Thanks, thank you.
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you so much. My first question is if you can talk about the confidence on leasing the new acquisition portfolio in terms of more color, because it seems it's more Gurugram-oriented. Worldmark Aerocity seems fine. Airtel Center seems okay, but on the other part, if you can talk a bit about, you know, what kind of tenants are you looking at and how good is the pipeline currently?
So, Puneet, if you really see, I've already mentioned the kind of tenants we have in Gurugram as well as in Delhi. It's government of Delhi, it's next to airport. We have tenants like Eli Lilly, Mitsubishi. We have Forbes, we have, you know, Bristol Myers Squibb , and banks are there. A lot of Japanese companies are there, a lot of, you know, European companies are there. This is a first, wherever company wants to open a, you know, office in Delhi, this is the first place of call.
So, we have seen occupancy build up, you know, from we already seen occupancy moving up in last two years, and we are very confident that balance space we have. We have a strong pipeline, and gradually it should go up in Delhi also.
So, these are all non-SEZ assets, right?
These are all non-SEZ assets. These are all non-SEZ. Delhi is non-SEZ, Gurgaon is non-SEZ.
Yeah.
And it works very well with us because we have two SEZ assets in Gurgaon. Of course, now we are able to convert SEZ to non-SEZ, plus this asset we have, which is again a non-SEZ asset, so it kind of complements and supplements to our existing portfolio. So very good addition to that.
Yeah, so I wanted... But why would they still have 86% kind of occupancy, Worldmark Gurugram, Worldmark Delhi? Why would they still be at 95, not higher end? And what are the market rents for Worldmark Delhi, now?
Yeah. So if you see, we always have maintained that we, of course, occupancy is important, but we just try to always, you know, maximize the NOI, and that has been our strategy. And when pipeline is strong for so Gurugram and Delhi both, we'll gradually lease them up to increase our, maximize our NOI. If you see, so that's, you know, that's in terms of strategy. For Delhi, of course, the rentals are in the range of INR 200+ right now.
... Which is the interest rate as well? So, there is no, not much-
222-225 now, and interest rate is about 200 less.
Okay. So two-
It makes 225 around, and that's the number, that's what we're leaving at.
Airtel Center is now 100% owned. How old has that been? Because WALE is still small at 4. So how should one think about— Is there any risk that they might move, or given that now they have sold this week as well, and there is no investor interest, or is that a proper?
I mean, so Puneet, so Airtel has a 3-year lease left on this property. As a part of this transaction, they're willing to extend the lock-in by about 2 years. So we'll get about 2 years of lock-in in the REIT ownership.
Beyond that, there's one year of lease term that will be left. And beyond that, there's one year additional backstop that Bharti Group is giving to ensure that should the property take about a year to refurb and get leased again, we at least don't lose out on the cash flow. So-
And refurb is your responsibility, right?
The lease up is our responsibility, but that's a legal risk that we take in our business.
But can I add here, Puneet, this is a, you know, this Airtel Center is a pretty prime location right on Expressway, and as in, as and when and if it gets vacated, it will not be difficult to lease, and it will, we should be able to lease it fast, and at kind of a decent rental.
Right. And is there any indication from Bharti Group as to how long do they intend to keep owning the REIT units which they will get?
We do, we don't have any indication. Sometimes the regulations prescribe for a one-year locking.
If you go through some of the press releases that have been put up, I think the intention of the group is to grow the partnership. So we see them as a long-term unit holder and also a provider of future assets going forward.
Okay, so there are more assets beyond this within that you have in private space?
Yeah, I mean, look, there's nothing tied up today. But look, I think the group is fairly inclined, given the promise of our vehicle and the long-term ownership mindset that they come with. I think, and, and if you can just go through some of the press releases that have been put out, so the quotes from senior management from there, we have great confidence that they will be a long-term unit holder and will also create a pipeline of assets for this REIT, as they continue to develop on their private balance sheet.
Right. This is helpful. And lastly, I look just going back on the, you said net leasing of 1.6. Is it possible to give some more color in terms of which all assets are you looking at there, and what would be the proportion for various assets?
So actually, if you really see, let me take asset-wise. Kolkata, we, you know, Kolkata, we are 88% if you don't count that short-term lease. We count that short-term lease, we are 98%. So our endeavor is that, you know, we tie up that when the short-term lease is vacated, we're able to get our long-term players. So there's more enough demand for Kolkata, which was, you know, so Kolkata is something for it. If you see Kensington, it is a 95%, and hopefully, it will grow. I mean,
Okay.
It's a small asset, 1.5 million, heart of heart of Bombay, you know, very strong demand. So hopefully we should be able to take it further only from 95%. Powai, we are at around 90%.
Yeah.
But there also, there's a leasing pipeline is there, so now our endeavor would be to take it further. You know, we should go beyond 90 and, you know, that's in terms of Powai minus Kensington. And one, as we have always maintained, said, you know, it's, it's around 97%-98%. There's hardly any office space.
Yeah, yeah.
There's a bit of amenities that we're working on to kind of ensure that that gets leased out. So if you really see, these four assets are, you know, I think, at a different phase.
Yeah.
Now, our effort is on in both Gurugram assets, G1, G2, and N2, which is Noida. These three assets also have a... You know, the good part is, like, you know, GCC reforms has done a great favor, great, great kind of outcome. So we have a demand from GCC as well as non-GCC, and we are hopeful that next 12 months, we should be able to meet our leasing guidelines of, you know, maybe hopefully at upper end, we should be able to lease leasing guidelines. And all in these three assets also, our occupancy should go up.
Understood.
Does that answer your question?
Yeah, that, that's fine. That's, that's helpful. Thank you so much. And expiries on G1, will that impact earnings at all, given that there is no income support there, so?
No, there's very limited expiry in G1. There's a very limited expiry in G1.
Okay. Okay, great. That's all from my side. Thank you so much.
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Yatindra Agarwal from Sun Life . Please go ahead.
Hi. My question is: What will be the actual occupancy of the REIT? So 82% is a committed occupancy, and 87% is economic occupancy. So what's the actual occupancy of the REIT? Thank you.
Sorry, can you repeat the question? Actual occupancy? Now, that's what we are saying is 82%. Actually, it's 82% right now, without the acquisition benefit. The acquisition benefit will be 82.5%, and-
... But that AT number includes the committed occupancy, which will be coming over the period of next 6-9 months or a year. So what is the actually occupied with, how much we are earning rentals right now?
No, no. Whatever is going to come up, that will lead to occupancy increase. Right now, it is 82%.
Okay.
Whenever the more yielding happens, then the occupancy will keep moving up.
Yeah. Okay.
Thank you. The next question is from the line of Parvez Kazi from Nuvama Wealth . Please go ahead.
Hi. Thanks for taking my follow-up question. So my question is regarding the Delhi Aerocity market. Now, obviously, over the last 15 odd years, it has done well, but there is a fair bit of supply, I think in the pipeline also. If I'm not wrong, I read in the newspaper that we are looking at almost some 4 million sq ft of new office space by 2029. So in your sense, what is the kind of demand which is there in that particular micro market? And how do you see, let's say, occupancy for the entire Aerocity district and rental growth moving up, let's say, over the next decade or so?
So, let me take this question first. See, in terms of, in terms of when you talk about this Delhi Aerocity market, it's one thing, it's pretty unique. You know, it is unique and many of the companies which want to start office in Delhi, I mean, this is their first place of call, and that's why we have seen occupancy moving up, we have seen rentals moving up. And this, the supply which comes in Gurugram and all that, doesn't compete with the Delhi micro market. And yes, we have, of course, we have enough pipeline for the vacancy what we have. And we continue to feel that we continue to feel that whether this pipeline will get occupied.
In terms of rental moving up, it's difficult to say how much percentage rental will move up, you know, annually. But, you know, 5%-7% rental move, moving up any micro market is something we want. That continues to happen, on average, I would say.
Sure. Thank you.
Thank you. The next question is from the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah, hi. Thanks for taking my question, and congratulations on market asset acquisitions. I had a few specific questions relating to the acquisition. First, if you can help us understand the broader timelines for completion of the acquisition. That's question number 1. Second, as part of the acquisition where you're acquiring Aerocity Worldmark portfolio, Bharti also has few projects under development. That's Worldmark 4, 5, 6, 7, and World mark. So is that something which will be considered under active discussion at some point? I understand that's currently part of Bharti Realty portfolio and not the JV. So if that's the case, some sense on that. And third, if you think of the acquisition again, where you're also acquiring Pavilion Mall in Ludhiana. So how should we read this?
Will there be more acquisition in the retail front, or is this the one of, that, that you're acquiring? Thank you.
I will request my colleague, Rachit, to take these questions. Rachit, let him know where everything.
Yeah. Can you repeat the first question that you asked?
Yeah, the first question is on the timelines for completion of the acquisition.
The timelines to completion is, you know, about 45 days from now. I think our unitholder meeting is being scheduled for 14th of June. Following which in about 15 days we should be able to conclude. There are a few other, you know, very small conditions precedent, which we don't expect to be a bottleneck, as we pursue this transaction.
Sure.
On the second question... So I mean, on the first one, look, honestly, by June 30, we should expect this asset to have come to the REIT, to the extent of the 50% stake. On the second question, look, yes, you are right. There are more developments happening, but the way we view it is a strengthening of this district. In many ways, we see this as the BKC of Delhi, right? Because of the superior infrastructure connectivity, I think great roads, you know, the metro is already operational, great proximity to the airport, good access from both Gurugram and Delhi. So I think from that perspective, we see this as a location for the future.
And to that extent, whatever Bharti Realty is building should only strengthen the character of this location as an office micro market. Including a, you know, large mall, which will be fairly state-of-the-art. So that's how we view their development. Today, there is no understanding on those assets, but as and when they get built and leased, they may become suitable for the REIT to pursue, should Bharti want to sell. So that's how we view it. On the third question, Pavilion Mall, yes, it's a one-off. It's a part of the portfolio couldn't be segregated. So at this point, I think, we will, there's no intention to pursue mall acquisitions as a strategy.
However, of course, since this is a part of the portfolio, we'll continue to operate it.
Sure. And as a follow-up, how should we think of, you know, acquisition—perhaps at some point, will you be also considering acquisition of balance 50% stake from Brookfield Parent, to make this a completely 100%, part of the REIT?
Yes. So we, the REIT already has a right of first offer on that stake. That parent still has about two years of regulatory lockup, that is ongoing. So once that expires and the fund wants to sell, the REIT will have a first look. So it's a conversation for that point in time.
Sure. Thank you, and all the best.
...Thank you. The next question is from the line of Sumit Kumar from JM Financial. Please go ahead.
Hi, good morning. Thanks for the opportunity and congratulations on able to conclude a market acquisition. My first question is on the land for this new acquisition. If I understand correctly, it's on a leasehold basis from the Delhi Airport Authority. So if you could give any color on what are the lease rent-free payments and what's the tenure of the lease? That's the first question. The second question is on the contractual escalations of 6.8 million sq ft lease area is at 7.4%. So what are your thoughts on this number? It looks a bit, you know, a little bit on the lower side. So, I mean, that's, that's those are my two questions for now.
Yes, I'll take the first one. The lease is till May of 2066. So there are about 42 years left. At the end of those 42 years, there's an option to enter into the lease directly with the Airport Authority of India, you know, at market terms then. So that's on the tenure of the lease. So 42 years period that's available, plus potentially a market renewal at that point in time. As far as the terms of the lease are concerned, there is about INR 30 crore annual lease payment that is made, and it's a part of a valuation report. Our assumptions as well.
There's an INR 30 crore annual payment, which is fairly contracted for the balance 42-year term, so there is no ground rent risk on the lease.
Yeah, and I'll take the next one on the escalation. So, so we had the 6.8 million sq ft of escalation, which we will do in the year, and we have been able to realize them all. So there isn't any re-negotiation on that, if that's what you're asking.
Just to add to it, I don't know why you think that's a lower side, because you know, sir, because generally, contractual escalations happen every three years are in the range of 12%-15%. So I just wanted to understand, is my understanding correct, or is there something adjusted in that number?
Yeah. Let me, let me answer that. So we have, yes, some of the, some of the assets we have 12%-15% every three years, and basically we also have annual escalations. So, you know, this number is somewhere between them. Somewhere we have annual, somewhere we have 12%-15%, and this 7, 7 percent, that number is a kind of an average of, these two. Does that answer my, your question?
Yeah, sure. Just one last follow-up on the acquisition, sir. Given that it's already at 91% and there is a little bit of, you know, MTM potential, is there some sort of synergy that you're looking at or any margin expansion here? Because currently at, you know, the run rate numbers, the NDCF acquisition is 1.1, so 1.1%. So wanting to understand, what is the scale-up that you're looking at with this portfolio?
Ranchit, would you like to answer this question?
Yeah, maybe I'll take this. So look, today, if you just refer to our disclosure that we put out on the NDCF computation on page 17, we are looking at about INR 21 crore NDCF at Brookfield REIT and Brookfield REIT share of 50%. This is at a, I'd just call it, you know, INR 480-odd crore NOI rental number, right? This number can go up to INR 550 crores in 2 years if we are able to lease these properties up to a 98% occupancy. So that INR 50 crore at 50% share of the REIT is another INR 25 crores that can flow through on an annual basis. Which means another INR 4 crores on a quarterly basis.
So this INR 21 crore number or INR 22 crore number that you see, can look like a INR 25 or a INR 26 crore number, once the properties hit a 97%-98% occupancy, as well as the near-term MTM that is available in the next two years.
Okay, fair enough. Yeah, that's helpful. Thanks on all the best.
Thank you. The next question is from the line of Suman Chowdhury from JM Financial. Please go ahead.
Yeah, hi. I might have missed it, but just wanted to get an update on the assets where the occupancy is still on the lower side, G1, G2, and I think it was N2. So what really is happening? Are we seeing some traction, and I think in a couple of these, the occupancy, quarter-on-quarter occupancy has actually declined in one of these, I think. So what really is happening there? Is it just the normal pipe normal new leasing taking some time, or do we still have some weakness in these particular assets?
No. Yeah, so if you really see, out of, you know, I would 7 assets we have, 4 assets we have talked about where, you know, they're, they're at least two are around 90% occupied, and, and, and probably then addition to Kensington, which is also part of property is commanding high rent , and Noida N1 is around 97%-98%. So 3 assets where, you know, occupancy is on those sites is in two are in two are in Gurgaon and one is in Noida Sector 135 . Now, the good part is that all all 3 assets have, you know, we can convert SEZ space into non-SEZ space. We already have applied for conversion.
We, we also have a strong and good pipeline for SEZ space as well as non-SEZ space, so that's the good part. So we should see, occupancies moving up in these three assets also, and incrementally in other assets also, that we are very confident about. And just to answer your question about the decline: so if you really see, we have declared that last, last quarter our, our, occupancy rate bottomed out. And from there on, in every asset, it's moving up. In one of the assets, it's declining. When declining happened, it happened last year. But if you see last quarter and then, occupancy are moving up across, across assets. Of course, somewhere they have moved up much faster, like in Calcutta.
Pradeep and Chirag, I'll just add, if you look at, you know, all the SEZ assets, if you look at Candor N1, for example, the occupancy at, last year, declined to 78%. It is up to 95%. Calcutta K1 is 74%, we are at 88%, excluding the incubation space. This is a similar trend, and as these, as these assets go through the life cycle, some assets may lease out faster, but the pipeline continues to be equally robust across all assets. So we are pretty hopeful and confident that we'll start seeing similar replication, as, we go through the current year.
All right, for the space where we've asked for conversion, where we've applied for conversion to non-SEZ, do we have a good pipeline visibility over there for the non-SEZ space?
Yes. So we have applied for 1.2 million. Out of 1.2 million, we already have signed leases for about 50%, and for balance 50% is a good visibility. And for at least some of the places, we are at advanced stage of discussions for signing.
Understood. Thank you, and all the best.
Thank you.
Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Yeah, thanks for the follow-up. Just, you know, couple of questions on distribution. So one, I just want to understand, this, for this quarter, NDCF per unit was INR 4.66, and actual distribution is INR 4.75, so we'll fund the balance through our existing, you know, cash that we have, is it? Is that my understanding right?
Yeah, that's correct, assumption.
Sure. Sure, sure. And, you know, just on this distribution per unit, getting back to about 5, earlier we have guided, like, it would take couple of quarters more. You know, with the kind of leasing that we have seen in this quarter, you know, any, you know, any update on that, or we'll still remain intact with that timeline of second half, from second half onwards?
So Pritesh, as what we are seeing, once you start leasing, there's bit of a, you know, initial 3, 4, 5 months, you know, 3, 4 months are rent-free also. So, you know, of course, you would appreciate that after you get signed in, then occupy, it takes more 3, 4 months to start, for start rents to start flowing in. So we would maintain-
That for next two quarters, we are at 4.5-4.75, and after two quarters, we'll review, and then we'll declare.
Sure. Okay, perfect. That's helpful. Thank you.
Thank you. As that was the last question for the day, I now hand the conference over to the management for closing comments.
Okay. Thank you everyone for joining today's call, and we look forward to connecting with you next quarter.
Thank you. On behalf of Brookfield India Real Estate Trust, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you.
Thank you.