Ladies and gentlemen, good day and welcome to Brookfield India Real Estate Trust Q2 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. On the call today, we have from the management, Mr. Alok Agarwal, Chief Executive Officer and Managing Director; Mr. Rachit Kothari, Non-Executive Director; Mr. Amit Jain, Chief Financial Officer of Brookfield Management Services Pvt Ltd ; and Mr. Shailendra Sabhnani from Brookfield. I now hand the conference over to the management. Thank you, and over to you, sir.
Good evening, everyone. This is Alok, and welcome to Brookfield India Real Estate Trust Q2 FY 2026 earnings call. I extend a warm welcome to all our unit holders, analysts, and participants joining us today. Let me begin by sharing some insights on India's macroeconomic environment and its continued relevance to the office real estate sector. India continues to be one of the fastest-growing large economies in the world. The macroeconomic environment remains supportive with stable inflation and a pro-growth monetary policy stance. Following the cumulative 100 basis points repo rate cut this year, liquidity has improved, and that's creating a positive setup for businesses and investments. The Indian office market continues to demonstrate remarkable resilience and depth.
Gross leasing activity for the first nine months in calendar year 2025 achieved a record 60 million sq ft, and the sector is on track to surpass 90 million sq ft of annual leasing activity. Global capability centers, called GCCs, contributed more than 38% of total absorption in Q3 FY 2025. A clear indicator of sustained occupier confidence and India's position as an office to the world. Another noteworthy development during the quarter was SEBI's recent reclassification of REITs as equity instruments. This progressive move is expected to enhance liquidity, broaden institutional participation, and further strengthen investor confidence in the REIT ecosystem, a positive step that reinforces REIT's position as a mainstream asset class within capital markets. Turning to Brookfield India REIT, I'm pleased to report another strong quarter of business performance for Brookfield India REIT, marked by healthy leasing activity, continued occupancy growth, and robust financial performance.
When we talk about leasing and occupancy during Q2 FY 2026, we achieved gross leasing of 5,992,000 sq ft, maintaining strong leasing momentum. About 46% of this leasing came from GCCs, reaffirming their continued preference for high-quality, institutionally managed campuses like ours. Our committed occupancy has now surpassed 90% and increased by over 10% since the SEZ policy reforms were initiated in 2023 end. Importantly, leasing traction continues to be broad-based across SEZ, IT commercial, and NPS spaces. Over the last 24 months, we have cumulatively leased over 6.4 million sq ft, with GCCs contributing more than 35% of that leasing volume. We also recorded a re-leasing spread of 21%, reflecting the underlying strength of our portfolio and the quality of our tenant base.
We are also excited to announce the proposed acquisition of Ecoworld, a fully built and stable Grade A large office campus located in Outer Ring Road, Bangalore, one of the best-performing micro markets in India. This campus has an occupancy of 94% and is expected to touch an occupancy of 96%-97% in the next three months. This transaction when completed will be transformational for Brookfield India REIT. This will mark the entry of Brookfield India REIT to Bangalore at scale. The transaction will increase our operating area by over 31%, expand our GAV by about 35%, and take our pan-India footprint to seven cities. This will also improve tenant diversification by increasing the share of GCCs to 45% from 37% and reduce the share of top 10 tenants to 30% from 34%.
Post-acquisition, our portfolio will have over 32 million sq ft of operating assets, making us one of the largest and most diversified office REITs in India. In terms of our ESG commitments and progress, during this quarter, we continue to do so, and we have got recognition from global ESG institutions. We have received a five-star GRESB rating for the fourth consecutive year. Our key recognitions in the ESG include EDGE certifications by IFC for the majority of buildings in Downtown Powai, recognizing excellence in energy and water efficiency. Five-star BEE ratings for several assets, including Downtown Powai, SEZ, Prudential, Delphi, Spectra, and Winchester buildings. British Safety Council five-star ratings for the majority of our assets. Looking ahead, we expect the leasing environment to remain robust, driven by the continued expansion of GCCs and India's position as a global technology and service hub.
With over 90% of occupancy, a strong leasing pipeline, and the proposed Ecoworld acquisition, we are well-positioned for sustained NOI and distribution growth in the coming quarters. Let me request Amit to take you through the financial performance. Thank you.
Yeah. Thank you, Alok. And good afternoon, everyone. I'm pleased to share that we have continued our strong financial performance in Q2 FY 2026. Our net operating income for the quarter stood at INR 510 crore. This reflects steady YoY growth of around 13%. Including our commercial portfolio, the NOI stands at INR 640 crore. We declared a distribution of INR 5.25 per unit, translating to INR 336 crore in totality, a 14% YoY increase compared to Q2 FY 2025. Our net asset value stands at INR 349 per unit, up 4% in H1 FY 2026. Adjusting for non-cash, non-GAAP items like deferred tax liabilities and goodwill for the north commercial portfolio, the NAV shall be INR 354 per unit. Our balance sheet remains robust, with LTV at 21.6%, excluding shareholder instruments, and AAA stable ratings from both ICRA and CRISIL.
The average interest rate today stands at 7.5% for the REIT and would be positively benefited by any future repo rate cuts, given the majority of our portfolio debt are repo-linked. We have a long-dated debt profile, minimal near-term amortizations, and ample headroom for future acquisitions. In addition to what Alok highlighted, the proposed acquisition of Ecoworld is going to be a great addition to Brookfield India REIT in terms of numbers. The proposed acquisition at INR 13,125 crore is at a discount of 6.5% compared to the average GAV computed by two independent registered valuers. The addition of Ecoworld will help increase our proforma NAV to INR 355 per unit from current INR 349 per unit and would also be accurate from the DPU standpoint, increasing the DPU by 3% on a proforma basis compared to the current rent rate.
With this acquisition, the share of dividends in total distribution is also expected to double to approximately 30% from current levels of 15%-16%. Let me now request Rachit to take you through more details on the proposed acquisition of Ecoworld.
Thanks, Amit. This is a big milestone for us, and we are very excited to be announcing what is going to be, if approved, the largest deal in the Indian REIT space to date. More than that, we are excited for the fact that this truly completes our pan-India story, that the journey we had set out on when we listed this REIT in 2021. As many of you would be aware, most large parks in Bangalore are already under a REIT structure or are proposed to be under REIT structures. To that extent, this acquisition was both strategic and important to our REIT in particular. The REIT was close to this situation for over a year. We had been talking to the investors about it as a part of our earnings presentations and had already raised about INR 4,500 crore of capital that we are now.
Proposing to top up by launching another INR 2,500 crore-INR 3,500 crore of fundraise that will help us conclude this transaction. There are a few important points that I'd like to mention. Since we have the benefit of all of you on this call. First, this acquisition will mark a large entry for our REIT into Bangalore, as Alok highlighted, making it a truly pan-India REIT. Bangalore will be almost 30% of our value and income economics going forward. Second, the transaction has been structured very well to match payment with income. The REIT is going to pay for the lease tars upfront when they close the transaction and will get 18 months to pay for the vacant tar, which is going into refurbishment, which will give it time to relaunch it, lease it, and also raise capital to finance it.
Third, the projected metrics are very attractive on both counts, yields and returns. The REIT is acquiring or proposing to acquire this asset at a 7.7% forward cap rate on the lease tars, which sets up to almost 8% DPU yield on the incremental INR 3,500 crore equity that is going to be deployed here, which is 25% higher than where our stock is trading in yield terms today. Second, a portion of the asset is still under-rented, which creates a 7% per annum growth potential over the next five years as these mark-to-markets get realized.
Lastly, on the returns, the asset IRR with a 7.7% entry cap rate and a 7% growth will stack up to close to 14.5% on the INR 13,000 crore price that we have, which would mean an 18% equity IRR on the acquisition standalone, but 25% incremental IRR for the REIT on the INR 3,500 crore equity that is yet to raise to finance this deal, making it a truly attractive proposition to significantly uplift the overall total returns of the REIT while keeping the LTVs below 35%. Lastly, we have been highly focused, as you are all aware, on increasing the share of dividends in our DPU to increase its appeal to a larger investor base. This transaction will pull our dividend share up to almost 30% in the short term, which will improve the post-tax yields in the hands of our investors and make the stock more inclusive.
With that, we'll ask the moderator to open for questions.
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 touchstone 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Puneet from HSBC. Please go ahead.
Yeah, thank you so much, and congratulations on good performance from leasing. More importantly, if you can also explain on this transaction, how would you look at this 7.7% forward cap rate? If you can just throw some details behind it, it would be very helpful.
Yeah, so Puneet, that's it. I think this cap rate is based on a forward estimate for financial year 2027, which is almost the next 12 months versus where we will close this transaction at. Today, if you look at this asset, it's about 94% occupied at INR 102 of average rent. Which is about INR 8.5 billion of run rate in OLR terms. And add to it the service provider income. We're almost close to about INR 8.7 billion or INR 8.6 billion, right? Now, from this point onwards.
This is inclusive of service provider, no?
This is inclusive, sorry. So INR 850 is inclusive of service provider. Add to it two things. First, 5% growth for the next 12 months because this is September ending numbers to September ending numbers. So that is.
This is FY 2027, no? FY 2027.
That is correct. On average, September at the middle of that financial year would be the midpoint that you can compare to where you are right now on these metrics. That is September to September, a 5% growth on the OLR.
Okay.
102 is what's committed as of date, Puneet, if that's the confusion.
No, no. So my understanding is INR 850 crore divided by INR 13,000 crore, right? It doesn't come to INR 750 is what I'm trying to understand. I'm missing something here.
Okay, so let me break it down. INR 850 crore is from 7.1 million sq ft at 94% occupancy. For that, the REIT is paying INR 12,000 crore. Right?
Okay.
You have to first take INR 850 crore to its true income potential. As Alok outlined, there are advanced conversations that can take this occupancy to 96%-97% in the near term. When you gross up for that and you provide for a year of growth to take this to forward income, that will come to almost INR 900 crore or INR 910 crore. That you have to divide by INR 12,000 crore to arrive at the 7.6%-7.7% number.
Okay, INR 910 by INR 12,000. That's what you're saying?
Yes, that's correct. So INR 850 crore of run rate plus INR 40 crore of a year of escalations and another INR 20 crore on account of the lease up that is in advanced stages. We have good visibility of a INR 900 crore-INR 920 crore kind of a number, which gives you the 7.6%-7.7% cap rate on the INR 12,000 crore. Now, on the deferred component, which is the tranche two, that INR 1,100 crore is against a separate 700,000 sq ft building for which we are getting 18 months to pay and at the same time 18 months' time to lease it, which at a market rent of about INR 115 per sq ft would generate NOI of close to INR 105 crore, which will set up to close to late eight kind of a cap rate on that tower separately.
Right. Okay. A few more things. Occupancy for this building was only 85% till almost six months back. How soon would the 94% start generating rentals? Is there a fit-out period, etc.?
Yeah, so INR 85,000 was including the tower for which we are deferring the payment. If you adjust for that, you take out 10% from the denominator, INR 85,000 will gross up to INR 93,000-INR 94,000, which is really where we are at right now. This is all very near term. What Alok feels you to add?
No, no. Of course, the market has seen a lot of traction, and rent fees are in tune of three, four, five months. Most of these leases would start generating rents in near term. This is not going to take a few quarters, next few months. Except.
For the existing seven—sorry.
No, go ahead, Alok.
For the existing 7.1 million sq ft, would you see a need for any major refurbishment in the next one to two years?
No, these are all occupied where the refurbishments have to be done. They already have done. So no major refurbishments required rather than the general refurbishments which could be required in any campus.
Understood. Lastly, just on the technical side, when I look at the values report, the rental is INR 92,000 versus your presentation would say INR 102,000. Can you help me bridge the gap? I think some parking and other things need to be added, but if you can just break it down, it will be very helpful.
Yeah. Hi, Puneet. Yes, this INR 92,000 number is the warm shell rent average rental. There is approximately INR 45,000 of parking. INR 92,000 + INR 45,000 is INR 97,000. There are the committed LOIs that are going to kind of come in, which will kind of take that number, almost like 0.7 million sq ft of signed LOIs, which will kind of start generating rent, which are at higher rents of closer to INR 110,000, which will kind of take this number from INR 97,000 to INR 102,000. That is the INR 102,000 number that you kind of see in the presentation today.
Understood. Understood. That's helpful. Thank you so much. You're all the best.
Thank you. The next question is from the line of [Yashish Gilganshi] from BOB Capital Markets Ltd. Please go ahead.
Good afternoon, team. Thank you for taking my question. Congratulations on signing the binding agreement to acquire Ecoworld. I would like to know when you expect to close the deal and when the asset is likely to start generating revenues for BIRET . Also, is there a ramp-up period before the asset is expected to start operating at a stabilized level?
Yes, so on the closing, I think our target is to close it within this quarter or early next quarter. I think the intention will be to do it as soon as possible, which means you can expect income to come from next quarter onwards from this portfolio, either partially or for the full quarter. We do not expect any significant ramp-up period because we are very close to the 96% mark on the occupancy. Of course, there will be lease-ups in the portfolio. Traditionally, the asset has been 98%-99% occupied. We may still see a couple of percentage points picking up, but it will be fairly stable from an income generation standpoint.
Okay. So just so I understand this correctly, you expect to close the deal this quarter and the revenues to start coming in in full Q4?
That's correct. That's our target.
Mr. [Yashish]?
Thank you, Sunil. That's it for me.
Thank you. The next question comes from the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah, thanks for the opportunity and congrats on the acquisition. My first question, just a clarification. If you look at the recent acquisition of Ecoworld, there seems to be another sponsor asset in proximity, which is Ecospace, which does not seem to be part of the deal. Could you share some insight in terms of how we should read this and at what stage would you also look to acquire the INR 1.6 million sq ft at Ecospace?
Yeah, no, so that's a good observation. I think at this point in time, our focus is on Ecoworld. Ecospace can potentially come in the following years should the sponsor want to sell that asset. We'd react to it when it comes to market. At this point, I think our focus is just on Ecoworld to conclude that on. That's a smaller asset, as you said. It's one-fifth the size of what we are buying. It will be, I would say, very complementary and strategic to us whenever it comes to market.
Sure. Thanks, Rachit. Just to follow up, the sponsor recently acquired a mixed-use land BKC as well. You have about INR 0.3 million sq ft in three floors in G-Block, BKC. This asset, which you have acquired, is again in G-Block. At what stage would you look to potentially bring that about INR 1 million sq ft BKC in as part of the REIT, or is it too early to think BKC assets coming into the REIT platform?
Yeah, I think it's a little bit too early. I think it's still at a greenfield stage. There's at least four to five years of hard work left on that property before it starts generating rent. It will become suitable for the REIT at a later point in time. On your observation on Godrej, BKC, I think it can be fairly near term should, again, the seller want to or the sponsor want to sell the asset. There's INR 250,000 sq ft in BKC in one of the better buildings. Clearly, the REIT will be interested as well.
Sure. My second question to you, Alok, what feedback are you getting from your tenants regarding future leasing opportunities, considering the global uncertainties? Are you seeing some pause in terms of leasing decisions or any delays in terms of finalization of deals?
Yes, so currently, we have been living with these uncertainties for the last, I would say, five to six years. I can tell you things have never been so better what we've seen in the last 12 months. We have seen that happening. Occupancy for REIT has moved up considerably, and it's kind of inching every month. Today, we have, as SEZ reforms also have played a role, SEZ vacancy has gone down. What we have converted, we are able to get new tenants, new kind of tenants, which we could get them into our campuses. If you really see the occupancy terms, occupancy numbers, I would say you can go to slide. You can go to this slide of 14. There you can get a sense. Most of our non-SEZ assets are around 95%-98%. Even SEZ without non-processing area is 91%.
Only non-processing area, which started coming to market 18 months, 20 months back, is ramping up. It's moving from zero to it has 61%, and it will move to higher numbers. Pipeline is strong. Fairly strong momentum. What was happening in the U.S., at least what we think and what we hear, that will, again, drive stronger, I would say, outsourcing or movement to India. That probably will strengthen. That's the sense we have.
Sure. This is helpful. My last question, Alok, how are you observing the demands from flex-based operators across your portfolio, especially since many of the REITs have been highlighting them among their top tenants? How do you view this segment as a demand driver, and is its presence within your portfolio increasing?
No, our target is to have about 5% or maximum 10% of our space go to flex-based operators. That is a target, and that demand is there. We have, like in Powai, given a space. The flex-based building which got vacated has been given to COWRKS, and they have tied up with a global tenant. They are definitely helping us in letting us move our office too.
Sure. This is helpful, Alok. I'll come back in a few. Thank you and all the best.
Thank you. The next question is from the line of Mohit Agrawal from IIFL. Please go ahead.
Yeah, thanks for the opportunity. Just continuing with the previous question on the SEZ properties, could you give some specific color on when the occupancy across your Gurugram properties, G1, G2, and actually even N2, start moving up? Some specific timelines in the next couple of quarters or so?
Occupancy is always already moving up. I mean, let me kind of talk about G2, which was, I think, last quarter was at 73%. Now it's at 78%. So 5% kind of occupancy has moved up in the last one quarter. Again, G1 occupancy, if you see over the last 12 months, you will see improvement. K1, again, SEZ moved substantially up. N2, again, has moved up. It is kind of moving up. Our sense is, as we are saying, our target for year-end is around 93%. That largely will be contributed by these SEZs only. The scope for non-SEZ properties to move up is there, but they are already at 95%, 98%, 80%, 100%. There the scope is limited. Of course, they will move up. Largely, these SEZs will be driving up the growth in occupancy.
Understood. That's clear. Yeah, sir. Okay. My second question is, on the acquisition, post this acquisition, you'll be having a debt to GAV of almost 34%. This is including the INR 2,500 million fundraise that you'll be doing. How comfortable are you with this level of debt, and what will be a comfortable target for you in the long run? Also, the second part to that question, really, what is the cost of debt for both the SPV-level debt and the REIT-level debt that you'll be raising?
Mohit, we've historically also stated that our long-term sustainable debt range is typically in the 33%-35% range. With this acquisition and the debt sizing that we are doing, we are effectively getting into this range. This comfortably maintains ratings at a AAA level while ensuring the best capital efficiency. We see this pretty much as a fairly sustainable kind of zip code that we will remain in. In terms of the cost of financing, if you look at the current portfolio, we are at 7.5%. The new debt on Ecoworld should also be in the same zip code. The REIT bond pricing should be in the 7%-7.25% kind of a zip code, which is where current yields are. Obviously, the pricing there would be more dependent on how the markets are closer to when we actually do this transaction.
That's pretty much how the debt numbers would look like.
Perfect. That answers my questions. Thanks.
Thank you. The next question comes from the line of Pratheesh Sheth from Axis Capital. Please go ahead.
Yeah. Thanks for the opportunity. Just one question on the acquisition. You talked about 18% IRR and 25% incremental IRR. Just sort of some clarification. Can you exactly, again, reiterate those numbers? Just for clarification's sake?
Sure. Let me break this down for you. I think on the INR 12,000 crores that are supposed to go out upfront, the cap rate is about 7.7%. This is against the lease stars. These lease stars have a 7% growth profile on a five-year basis as a combination of the contracted growth of 5% per year + 2% additional to the MTM. There is about 30%-35% of area that is coming up for expiry at almost 30% MTM in this period. Right? This gives us a 7% annualized CAGR on that. This stacks up to 14.5% asset-level IRR. The tranche two, which is against the MT tier, will be bought at a late eight kind of a cap rate with a 5% growth profile. That also stacks up to a 14% asset-level IRR.
On an average, on the asset, you're making 14%-14.5%. Right? On top of it, if you just look at the acquisition standalone at 33% LTV, which has been our guidance all throughout. Borrowings are going to be at 7.5%, as Shailendra described. You will be able to add on the equity side another 3%-4% for the equity IRR because of the leverage. That's about 18% on the acquisition standalone, 33% LTV. Right? Are you with me, this far?
Yes, yes. Absolutely.
Right? Now, because to finance this acquisition, part of the money is going to be raised through incremental debt between 7-7.25%, as Shailendra described. 50% of money is going to come from that. 50% is the incremental fundraise. Right? You are basically going to get 18% returns while financing half of it at 7-7.25%, which means it is going to be 25% on the incremental equity rate.
Got it. Got it. Very clear with the math. Thank you. Thank you for that. Just on the existing portfolio, I think you talked about this Earth Soil Crystal House, which got released. Just trying to understand the MTM or the range that we would have contracted for that. Or maybe just in terms of percentage, you can quote how much releasing spread that we got on that?
Almost about 30% over the long-term lease we had.
Got it. Got it. On this interest rate, the cost of debt that we have now, I think it has gone up quite a bit quarter to quarter. Yet, I think on the cash interest outgo, we are not seeing too much changes in this quarter. Potentially, it will come next quarter. Is it?
No, no. So yeah, the full impact of 100 basis points rate cut. Got. Fully built into the portfolio mid of the quarter. Right? So from next quarter onwards, you will see a full quarterly impact of 100 basis points rate cut.
How much equity? Yeah. Just from the existing debt, I mean, we would have a new debt which will come in once we complete the acquisition. Just on the existing debt, how much on the absolute basis do you see this interest cost further going down?
In absolute terms, it will be, say, a quarterly impact of around INR 10 crore on the total debt number.
Got it. Got it. Fair enough. Just on the SEZ properties, again, I mean, you gave qualitative comments earlier. You mentioned about strong leasing pipeline that you're looking at. If you can quantify. Occupancy targets for the SEZ property by this year-end or next year, what would it be?
As I said, by March, we are looking at around 93% occupancy. As I said, bulk of that occupancy ramp-up would happen from SEZ properties only because SEZs are already at 95%+ . If we can do a math, actually, I do not have an individual tool.
Yeah.
That's not out. The SEZs will move up to, let's say, around, I mean, the cost plus non-purchase will cross around 90%-91%.
Sure. Sure. That's really helpful. Thank you. That's it from my side, and all the best.
Thank you. The next question comes from the line of Sumitk umar from JM Financial. Please go ahead.
Hi. Good afternoon. Thanks for the opportunity. Just wanted to get a clarification on the deal terms.
Yes, sir. Please go ahead. I think we lost it.
Yes. Hi. The line for Sumitk umar has been disconnected. The next question comes from the line of Kunal from Bank of America. Please go ahead.
Okay. Thank you. One question on the refurbishment CapEx that you have planned for the 7.7 million part of the asset acquisition. If you can just help us sort of come up to speed on if any major refurbishments have been undertaken in the park over the last five, six years because I know the asset has been in operations for several years. Or if you could sort of give a quick comparison as to how you would expect the refurbishment CapEx here over the next five years to be different from the rest of your portfolio. Thank you.
I mean, if you really see, this asset, some of the buildings have come up, I would say, in the last, of course, 10 years- 15 years. It's not that they're old buildings, and they've been maintained well. They're one of the best buildings, the best centers. What INR 150 crore, what we're proposing is because this Campus C, ABC, is getting vacated. There we're going to put INR 150 crore, bring the building to the best of the top-notch buildings available today. Because, again, when it's going to lease out for the next 20 years, then there's no opportunity to kind of do CapEx when the building is leased out. Otherwise, in campus, normal upgrades have been done. No major requirement was there.
Right. Alok, essentially, would you think that as you are looking to realize the MTM potential, they should not need upgrade CapEx? The current status of the buildings should get you there?
No, no. See, existing buildings, whatever the MTM will happen, they are getting even past also, they're getting leased out on the basis of as-it-is basis.
No major CapEx.
No major CapEx is required. Yeah.
Except for Campus CBC, they're putting INR 150 crore.
Kunal, if a question was, have we spent money upgrading the 7.1 million sq ft in the previous ownership? The answer to that is yes. A lot of it is now complete as of this quarter. Most of those CapEx programs are complete. Half of the portfolio is actually fairly new, delivered between 2015- 2018 for the most part. Those buildings continue to, of course, perform very well and do not require that much CapEx. The older parts of the portfolio have been taken care of, except 3ABC, like Alok said, where we are projecting a INR 150 crore CapEx. It is very likely that somebody just takes it as is. At least for now, our plan is to refurbish it and relaunch it and hopefully get INR 5-10 more on the rent if we can.
Okay. Got it. Exactly. I had exactly that in mind because, I mean, there's been some recent feedback that with buildings approaching the 15-year mark, there are cases when if you need to push for an MTM increase, upgrade CapEx is sort of required. If that's been undertaken in the last few years as well, I think that's exactly what I wanted to clarify.
Okay.
Perfect. Thank you so much.
Thank you. The next question is from the line of [Gideesh Choudhary from Edelweiss Arc]. Please go ahead.
Hi. Thanks. Firstly, how should one see the DPU trajectory going ahead, especially near to medium term? Because the asset is essentially getting operationalized or consolidated towards the end of fiscal 2026. As and when the funding structure settles, could we see some temporary dip or a flattish trajectory of DPU? Yeah.
The question is just on the acquisition or for the overall REIT? Just to clarify.
For the overall REIT.
Yeah. Gideesh, so look, I think we are still in the overall REIT. When we add this property, we're still only about 91% occupied. There's a fair amount of lease-up that is there in front of us. Alok mentioned we're looking to end the year at the 93% mark. There'll be fillip coming from the lease-up. There'll be, of course, the rent growth that we have as a part of our contracts. Lastly, I think the borrowing cost benefit has not fully flown into the DPU, as Amit pointed out. I think it'll be a combination of all these three, which are all positives. That should ideally push this up forward.
We do not anticipate a decline at this point in the DPU performance, certainly in a situation where the incremental acquisition that we're doing is at 20%-25% higher DPU levels than what we are currently trading at.
Expectations are that the repo rate should go down further. If that happens, that'll be an incremental impact on the cash flows for the REIT.
Got it. Secondly, on the acquisition, on the asset Ecoworld. Like you mentioned, the current occupancy is 94%. You intend, and on your assumptions, mention 97.5%. Just to understand this better, how much is committed till now? Because to achieve 97.5% rental generating, we need a lot of commitments in the next two to three months, right?
Fair observation. 94% is committed. We have advanced discussions, which probably can take two. Very advanced discussions where it has not been signed, but in principle agreed. That makes it 96%. The balance, another 100 basis points-150 basis points, is something that has to go up. The pipeline is very strong. We have seen how the property has got ramped up. We are confident we should be able to achieve those numbers.
Can I also add that there are three components of spaces in this park, right? If you see, and this is on page five of our acquisition deck, a commercial portfolio of 4 million is 97% occupied. SEZs are 97% occupied. The only vacancy is in NPA spaces that we are in the process of converting. Once that conversion finishes, we will see this also go to 97%. That confidence is there in the management today that with only a small amount of space left, it should be fairly straightforward to get 97-98% occupancies.
Got it. Got it. Thank you. All the very best.
Thanks.
Thank you. The next question is from the line of Sumitk umar from JM Financial. Please go ahead.
Hi. Good afternoon. Am I audible?
Yes.
Yeah. My question is on the two clauses of the deal structure. One is the rent-free true-up, and the other one would be the FSI earn-out. If you could explain it in a little bit detail, please.
Yeah. Rent-free true-up is fairly straightforward on the committed tenancies that are there in the portfolio today, which are a part of the 94%. Whatever rent-free periods have been committed, because some of these are new leases, those rent-free periods will be compensated by the seller in cash. That totals to almost close to INR 200 crore . That number has been settled at INR 100 crore. This, in a way, is cash that will be available for distribution without having income lag from the rent-free periods. Right? This ensures that the full rent potential of the property is translating into NDCS. Are we clear on that? I can move to the next question.
Yeah. Yeah. Okay. Okay. This is nothing speculative, right? Everything is tied up based on the leases that have been signed till date.
Yeah. No, I'm glad you asked. I think that's exactly the point. This is not speculative. This is against committed tenancies. There's no leasing assumed here. This is all leased areas.
Yeah. On the FSI earn-out, what is that, and on what conditions will that become payable?
Yeah. I think this is, and again, this is more detailed out in, I think, page 18 of the acquisition presentation. I think the idea really here was that the Campus 3ABC that we are planning to refurbish, while our base case plan is to refurbish it, for whatever reason there is an FSI upside here that gets unlocked because of the TOD policy in Karnataka. Given this property sits very close to the metro line, there is a possibility that the REIT might undertake a full redevelopment of this property if it is profitable for the REIT. In that situation, there is a formula that has been determined to see if the seller can be paid something additional. However, the management has done its estimate and its negotiations. Up to 1 million sq ft of additional FSI, nothing becomes payable.
Which I think is really the plan. I think five and a half acres should not take more than 1 million sq ft of additional FSI on top of what is already there. It is very unlikely that something like this becomes payable unless there are savings in costs as per the formula. For whatever it is worth, if there is more FSI, there is more upside for the REIT, and it is sharing it with the seller.
Okay. Just one follow-up on this. Suppose if this goes for redevelopment, then the FY 2029 uplift of NOI will not hold. It will get pushed forward.
That is correct. It will get pushed forward. The economics mentioned on page 18 will take over, which means that the property will then be, instead of INR 150 crore, we'll be spending INR 1,500 crore to build it. That will lead to another INR 1,500 crore of profits. That is honestly a 2x kind of investment if we were to redevelop it. That economics is on page 18. We expect that if we manage to get additional FSI, unless we are really committed to a tenant in Campus 3ABC, it is likely that a redevelopment may make more sense on that date.
Sure. Okay. Quite helpful. That's all from my side. Thank you and all the best.
Thank you. The next question is from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead.
Yeah. Hi. Just wanted to re-emphasize on that 3A and on slide 18 itself. In the base case, where there is INR 1.5 billion of CapEx, that is going to be spent by the seller in the base case scenario, or that's an additional cost to us over and above the INR 11 billion?
Yeah. That's a cost to the REIT. It'll be spent by the REIT.
That's spent by the REIT. Should the upside case work out, which is that you get the additional FSI, in that case, the total cost of the project then becomes INR 30 billion, which includes the INR 1.5 billion CapEx. You just go through the entire FSI premium, the approval cost, and the additional INR 15 billion of development cost. The entire project becomes a INR 30 billion project as opposed to your base case, which is INR 11.2 billion, which you pay, and the INR 1.5 billion of CapEx.
That is correct. Fifteen will be inclusive of that. Maybe a little bit higher there, but nothing significant. It will be inclusive.
Okay. Okay. Fair enough. Thank you.
Thank you. The next question is from the line of Puneet from HSBC. Please go ahead.
Yeah. Thank you for the follow-up. My question is, number one, on the FY 2027 expiry for this project, excluding the Campus 3, there is still a 0.7 million sq ft expiry. You talked about an additional 3.5% occupancy. So roughly close to 1 million sq ft will need to be leased out. What is the visibility on that? Do you think there is potential for some bit of disruption in 2027 in terms of some rent freeze, etc., which can distort the FY 2027 NOI?
Our judgment is that. This is FY 2027, right?
Yeah.
Yeah. We should be. We should be able to kind of. These tenants should continue. That's my sense.
Okay. So all 0.7 will renew in a way?
I think so.
Okay. That's helpful. Secondly, on this Campus 3 redevelopment, you have already factored in 1 million sq ft of additional FSI, right? Is that still contingent on government approvals, etc., or is it a done deal and you're looking for anything over and above this 1 million sq ft?
No, no. No additional FSI is a done deal right now. In fact, the TOD policy is not notified. For all practical purposes, the base case is what you see on the left side of the page. Right side is only an upside if it happens in short order. Otherwise, I think the REIT will be well set out on its plan to refurbish the building.
Nothing has been confirmed.
Okay. And INR 1,125 is still a firm payment? It's not a conditional precedent on this TOD?
No, no, no. No. That is for the structure that stands today. FSI earn-out is the conditional payment.
Understood. Understood. If you can just share some numbers on net debt for North Commercial portfolio and for the GIC Cohn portfolio.
Should be a part of the presentation.
It's a gross debt number. Net debt.
3,200 odd crores would be the.
This is a gross debt.
Would be the gross debt for the North Commercial portfolio.
Yeah. Net.
Just give us. Wouldn't be very different to my mind, but we can come back on that, Puneet. The other question was on the GIC.
Same. GIC. Yeah. Net debt there.
Net debt on the GIC portfolio. Just give us a second.
These are not gross.
What are the gross numbers?
4,500. Yeah.
4,500 crore is the gross debt number, Puneet, on the GIC-owned JV portfolio. Yeah. Which is G1 and Kairos. We'll come back to you separately on the net debt numbers on these.
Okay. Got it. Thank you. All the best.
Thank you.
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Thank you.
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