Call for Q2 FY 2027 financial results. Please note 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. Please note that this conference is being recorded. With that, I hand over the call to Mr. Shravan Kailasa from Mindspace Business Parks REIT. Thank you, and over to you.
Good morning, everyone, and thank you for joining the earnings call for Q2 FY 2027 for Mindspace Business Parks REIT. At this point, we would like to highlight that the management may make certain statements that may be forward-looking in nature. Please be advised that actual results may differ materially from these statements. We do not guarantee these statements or results and are not obliged to update them at any point of time. I would now like to welcome our CEO and MD, Mr. Ramesh Nair, CFO, Ms. Preeti Chheda, and Mr. Govardhan Gedela , Head Corporate Finance, who will take you through the business updates and the financial performance during the quarter. We will then open the call to run Q&A. I will now hand over the call to Ramesh.
Thanks, Shravan. Good morning, everyone, and thank you for joining us. Q2 has been another strong quarter for us. We delivered our highest distribution of INR 6.67 per unit, which is 14.4% year-on-year increase. Our NOI grew by nearly 32% year-on-year to INR 836 crores. On a like-to-like basis, our NOI grew around 16.8%. Our leasing momentum has continued. We achieved leasing of 1.6 million square feet. This has taken our committed occupancy to a record 96.1% on a like-to-like basis, including the acquisitions which we did in H1. Our overall portfolio committed occupancy today stands at 93.8%. Happy to inform that 10 of our 16 assets are now operating at over 96% occupancy, with seven of them at the perfect 100% occupancy. The quality of the portfolio is also showing up in its value. Our GAV is now approximately INR 55,200 crores, up 16% since March.
This includes the addition of the Chennai acquisitions and also reflects the rising rentals in the various micro-markets we operate. Consequently, the NAV per unit rose 7.2% to approximately INR 565 per unit. Today, I'll cover four things: the market, where is our growth coming from, the experience in our parks, and also how we are building the wider platform. Preeti will then take you through the financial performance. Let me start with the market, where demand has held up well. The macro backdrop stayed unsettled through the quarter. Tension in the Gulf kept oil prices firm, and the rupee remained under pressure. After the quarter closed, the RBI raised the repo rates by 25 basis points, its first hike since February 2023. But on the ground, office demand tells a very different story. Calendar Year Q2 saw a media pause.
In Calendar Year Q3, the deals that had slipped got closed, and deferred decisions came through. JLL puts Calendar Year Q3 gross leasing at about 23 million square feet, up 41% on the previous quarter and the strongest quarter of the year. JLL, Cushman & Wakefield, and CBRE all reported the strongest first nine months on record at 61 million square feet to 66 million square feet of gross leasing, between 61 million square feet and 66 million square feet of gross leasing. It is just now the deals being signed. JLL also reports record net absorption of 42 million square feet in the first nine months of the Calendar Year. Occupiers are moving in and adding headcount, obviously. GCCs remain the anchor. They took 42% of leasing in the quarter, according to Cushman & Wakefield.
JLL and CBRE both put GCC leasing at a record 26 million square feet to 28 million square feet in the first nine months, calendar nine months, and JLL expects GCCs to beat last year's full-year record. Global firms are increasingly building their AI development and operations teams in India, and GCCs are taking more space to do it. BFSI had its strongest quarter ever, according to JLL, and Cushman & Wakefield named it the single largest demand driver. Hyderabad was once again one of the standout markets. It accounted for 30% of national volume in Calendar Year Q3, according to Knight Frank. In spite of supply picking up in some micro-markets in the country, many prime business districts remain in single-digit vacancy. In Mumbai, JLL reported a vacancy at a 16-year low. Rents are rising, and occupiers are obviously paying for quality.
For global companies, India's cost advantage remains compelling, and our infrastructure and talent keeps getting better. Estimates may vary across IPC research reports, but the direction is consistent, demand is healthy, and it is concentrated in the segments and cities where we have our strongest presence. Let me turn to where our growth is coming from. With most of our parks already full, growth will come increasingly from four sources: rental growth through contractual escalations and mark-to-market realization within our existing portfolio, leasing up of our Chennai and Airoli assets, new development within our established parks, and acquisitions from sponsors and third parties. Let me take each one by one. First, the rental growth and mark-to-market within our existing portfolio. Our portfolio in-place rent is approximately INR 81.50 per sq ft per month. That gives us a mark-to-market potential of about 23%, and we are capturing it.
Re-leasing spreads this quarter was 24%. Rents on this quarter's deals were also ahead of our own business plan. At Mindspace Madhapur, we pre-leased approximately 219,000 sq ft in B8 to a global biotech GCC at INR 133 per sq ft per month. B8 is now 91% pre-leased at an average rent of INR 117, and the balance 9% would be signed any day now. When we started redeveloping this building, we were expecting around INR 90. Madhapur itself is at 98.6% occupancy, with only about 160,000 sq ft available across 20 buildings in a 12 million square feet park. In Airoli, recent deals are now being signed at approximately INR 70 to INR 80 per sq ft per month, with one recent deal even touching INR 85 per sq ft. That tells you where the micro-market is heading. Also happy to share that Ascent Worli is now 100% leased.
This quarter, we signed a lease of INR 365 per month, the highest rent we have achieved in the Ascent asset. Some of you may remember, we had underwritten this asset at INR 325. That is what the quality CBD space commands in Mumbai today. Let's look at the second aspect, leasing up. In Chennai, we have had a great start. Our recent Chennai acquisitions, which comprises One Radial and Commerzone Pallikaranai , two high-quality institutional campuses of approximately 2.6 million square feet each on Chennai's OMR stretch. Since July, we have leased approximately 550,000 sq ft between INR 85 and INR 90 per sq ft. That also is ahead of the rents we underwrote at acquisition. This includes approximately INR 4.6 lakh sq ft at One Radial with a leading European BFSI GCC. This took One Radial committed occupancy from 57% to 75% in a single quarter.
Commerzone Pallikaranai also has moved up to 77.5% occupancy, with a recent deal at INR 90 per sq ft. We are also on the verge of closing another deal at INR 93 per sq ft. We remain confident of leasing these buildings by March, April 2027. Third, on the development front, we continue to build where the demand is. We have 6 million square feet under construction out of our 8.7 million square feet pipeline. Of this, 3.2 million square feet is due for delivery by March 2027. B8 in Madhapur, B1 in Commerzone Pallikaranai, where we are tracking ahead of schedule in terms of construction and getting the OC, and our next data center at Airoli West. That will take a completed portfolio from the present 37.7 million square feet to 41 million square feet. Starting with Hyderabad, our first redevelopment project, B1, at Madhapur is now complete.
We have received the occupancy certificate. This is a 1.5 million square feet building, fully leased to a global banking GCC. The client has finished their fit-outs, and rentals commence from January 2027. B1 is the blueprint for what will come next. We are currently evaluating further redevelopment opportunities in Madhapur, building on the successful delivery of our first redevelopment project. At Building 8, facade and finishing works are underway, and we expect the occupancy certificate to come in Q4 FY 2027. At B18, foundation work is underway using precast construction. B18 is pre-leased, like some of you know, for a Ritz-Carlton hotel. The Pearl Club within Madhapur has completed trial operations and opens to members this month. It is part of our strategy to build mixed-use ecosystems with integrated amenities. Now let's move to Navi Mumbai. In Airoli East, committed occupancy has improved to 85%.
At B17, the foundation work is underway at a 900,000 sq ft mixed-use development, a 300,000 sq ft Hyatt Regency hotel, which is pre-leased, and the 600,000 sq ft office block. We are also evaluating further data centers at Airoli. At Airoli West, which is at nearly 97% occupancy, we have submitted plans for a new building, B12, approximately 1.1 million square feet of new office space, and work for B12 is expected to start next quarter. Our experience of delivering and operating large business parks gives us the confidence to keep investing in building new capacity. Our data center business, also in Navi Mumbai, continues to scale. Mindspace remains the only REIT listed in India with a data center portfolio. Two data centers are operational in Airoli West. The third is due in March 2027, followed by the fourth in July 2027, and the fifth in December 2027.
In Commerzone Yerwada, we have started work on B9, a new 400,000 sq ft office building. Alongside it, we are starting work on the 200,000 sq ft hotel, which is again pre-committed. Fourth, let's look at acquisition, starting within our own parks. We continue to consolidate third-party ownership within our campuses. This quarter, we acquired another approximately 150,000 sq ft across Pune and Madhapur. At Madhapur, we acquired 100,000 sq ft in Building 10, giving us full ownership of office space in that building. Cumulatively, we have now acquired 800,000 sq ft of strata-owned space within our parks. This gives us better control over asset management, makes redevelopment a lot more easier, and room to unlock more value from parks we already know very well. Looking outside our parks, the acquisition pipeline is strong.
Our sponsor has an active development pipeline of 20 million square feet across various stages, providing a strong pipeline for future growth. Beyond the sponsor pipeline, we're also seeing a healthy flow of high-quality assets come to the market as several institutional funds approach us as the end of their fund life nears. We continue to actively evaluate acquisition opportunities that are accretive to unitholders and will strengthen our presence in our core markets. Growth is one part of the story. Keeping our tenants is the other, and that starts with the experience in our parks. Our parks are where our tenants spend their working day, and we keep investing to make that day better. It starts with how our parks are run. From 1st July, we transitioned to our new facility management partners, which include firms like JLL and CBRE. We are also continuing to upgrade our parks.
This financial year, we plan to spend INR 250 crores on base build upgrades and another INR 140 crores on MEP upgrades. At Airoli East, the upgrade program is nearing completion, and new F&B additions are strengthening the campus experience. In Pune, we opened a new food court in Commerzone Yerwada Building 1, adding more dining options within the campus. In Mindspace Madhapur, we completed certain road extensions, making traffic movement smoother. In Ascent Worli, the pickleball and padel courts are now operational. Hospitality is becoming a bigger driver of what we offer. Membership drives for the Pearl Club are underway, and Ascent Residences, our apartments in Worli, are shaping up well, which will start operations next quarter. Beyond the physical space, we have also moved from one-off events to year-round tenant engagement. An engaged workforce makes for a loyal tenant, and that supports retention.
We held IPC meets in Hyderabad and Chennai, engaging 300-plus IPC broker partners of ours, and we are also the title sponsors for the Chennai Night Run, where we've gained citywide visibility in the market. Let me now turn to the wider platform, starting with sustainability. The Science Based Targets initiative validated our near-term, long-term, and net zero targets, reinforcing our commitment to be net zero by 2042. In the 2026 GRESB assessment, we scored a perfect 100 for development and 94 for standing investments. We earned five-star ratings for the fourth consecutive year and were named sector leader in both. Mindspace Airoli East received the IGBC Green Landscape Gold rating. This is the first for any REIT in India. One Radial received the IGBC New Building Platinum rating. We were also recognized as the BW Sustainable World Awards 2026 for data and tech-driven ESG transformation.
Our people and our brand are evolving with our portfolio. We are proud to be named amongst India's top 50 best places to work for women 2026 in the mid-size category by Great Place To Work. We are investing in capability building at every level, from frontline customer teams to experienced managers, with a strong focus on technology and AI. Today, our campuses go well beyond offices, integrating workspaces with hotels, clubs, restaurants, F&B, recreation, wellness, and landscape spaces to create richer, more engaging environments for occupiers and their employees. Finally, a word on AI. Last quarter, we walked through how we use AI across finance, legal, and compliance. Those tools are now part of how we close every quarter, from rent roll conversion and regulatory checks on our filings to automated SEBI and MCA monitoring. On the demand side, our view has not changed.
We are not seeing lease tenure shorten or pre-commitments fall. We believe AI will add to office demand, not reduce it. We will get new occupiers, growing data needs, and stronger case for quality workplaces. Our job is to make sure our parks are ready for that. Let me close with where we go from here. Most of our portfolio is already full. From here, growth comes from within it. We have 3.2 million square feet due for delivery by March. B12 at Airoli West will add another 1.1 million square feet to a park that is already 97% occupied, and demand is there. We are tracking around 9 million square feet-10 million square feet of active RFPs across our markets. Our approach does not change. Build where occupiers want to be, lease well, and keep the balance sheet strong. Thank you for your continued confidence in Mindspace REIT.
I will now hand over to Preeti for the financial update.
Thank you, Ramesh. Morning, everyone. We continue to deliver strong financial performance backed by strong operating performance. Our NOI grew 31.9% year-on-year to INR 8.4 billion, driven amongst others by effective portfolio management, healthy office demand, which has aided leasing and rentals, and contributions from new acquisitions. Like-to-like NOI grew almost 17% year-on-year in Q2 FY 2027, reflecting the strong organic growth within the portfolio. Revenue from operations for this quarter increased almost 30% year-on-year to INR 10.1 billion, crossing the INR 10 billion mark. Within the existing portfolio, we have a development pipeline of 8.7 million square feet. Of this, about 5 million square feet will be delivered by FY 2029 So this, together with lease-up of vacant space, contractual escalations, MTMs, and contributions from our recent completions will all add about INR 17 billion-INR 18 billion NOI over the next three years.
We have also demonstrated a consistent track record of healthy distribution growth with double-digit DPU growth for several quarters now. This quarter, our distribution grew a healthy 14.4% year-on-year to INR 6.7 per unit, taking our cumulative distribution since listing to INR 126 per unit, in addition to the capital appreciation, reflecting the value of the underlying portfolio. On the September 2026 valuation update, the GAV of our portfolio increased by approximately 16% from March 2026 to around INR 552 billion. This includes our Chennai acquisitions as well as Strata acquisitions, which we completed during the first half. Our NAV increased by a healthy 7.2% from INR 527 per unit in March 2026 to INR 565 in September 2026.
This again reflects, amongst other things, the 1.8 million square feet of additional development potential, which has been identified in Airoli, Navi Mumbai, and Pune, together with rental growth across our markets, particularly Hyderabad and Navi Mumbai, the rising occupancies, and the recent acquisitions. Moving to the balance sheet, we continue to maintain a prudent balance between leverage and growth. Our loan-to-value stood at 29.1% as of September 2026, providing us with sufficient balance sheet flexibility to pursue our growth opportunities. Our cost of debt remained broadly stable sequentially at 7.4% per annum per month, though we expect the borrowing cost to move up in the quarters to come amidst elevated crude oil prices, rising inflation, and consequent tighter global and domestic monetary policies. Against this backdrop, we expect our cost of debt to increase by approximately 25 basis points by end of this financial year.
And of course, needless to say that FY 2028 could see further increase depending on how the macro factors unfold. However, we do not expect this increase in borrowing cost to have any material bearing on our NDCF, and that is largely because of two reasons. As all of you know, the recent tax amendments enabled REITs to move to the new tax regime without losing the distribution tax exemption in the hands of the unit holders and also allowing carry forward of MAT credit for utilization in future years. Mindspace REIT asset SPVs have decided to opt for the new tax regime. This helps us reduce our tax from 35% to 28.6% for the larger SPVs and also will help utilization of almost INR 90 crore of MAT credit, which can be now carried forward.
Tax saving from this transition to new tax regime should offset the anticipated increase in interest cost, leaving our NDCF mostly unaffected. Secondly, the recent RBI amendment permitting banks to lend to REITs offers us a new avenue for debt capital raise, which could help optimize our funding cost. Currently, we have about 60% of our debt fixed and 40% variable. We will keep altering our fixed and variable debt mix opportunistically to optimize our borrowing cost. To conclude, we remain focused on disciplined capital allocation across asset upgrades, redevelopment, new developments, and also acquisitions. Our objective remains clear, to drive sustainable distribution growth and maximize long-term returns for our unit holders while maintaining a prudent balance sheet and a robust governance framework. With this, I hand over the call to the operator to open the floor for questions. Thank you, everyone, and happy Diwali.
Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone who wishes to ask a question may click on the raise hand icon from the participants tab on your screen. We request participants to restrict to two questions each, and then return to the queue for more questions. To rejoin the queue, you may click on the raise hand icon again. We will wait for a few minutes until the question queue assembles. We will take our first participant. We have Karan Khanna of Ambit Capital. Please go ahead with your question. Karan Khanna, you can unmute your microphone and go ahead with your question now.
Hi, am I audible?
Yes, Karan.
Yeah. Thanks for the opportunity, and congrats on continued NOI growth and the sustained high occupancy across most parks. First question to you, Ramesh. Your portfolio is increasingly tilting more towards GCCs, while third-party IT and ITES exposures has reduced. Are these GCCs still taking larger blocks and committing for longer tenures, or are AI-related productivity gains beginning to affect the size of their space requirements? As a follow-up, can you share the latest tenant mix by rental income, rather than only by area, and talk a bit about any material concentration risk by tenant or sector?
GCC's mix today from an area perspective is 52%, and this has obviously gone up. Two years back, this was around 48%. Domestics continue to be around 24%, and IT services, we have seen a drop from 25% to 21%. The 4% drop in IT services having captured by the 4% increase in GCCs. In terms of rentals, rental revenue share, it is again 52%. That is in line with. Even if you look at our top 10 clients today, it is less than 30% of our portfolio. We have big GCCs like British Petroleum, Qualcomm, JP Morgan, Hitachi, all of them in our portfolio. So, GCC portfolio is increasing. Your question about if the sizes of GCC requirements are reducing, we have not seen that.
Incidentally, we have seen sizes actually go up in markets like Hyderabad, where I saw research which said that out of the 100 new GCCs who came to India, around 45% of them went to Hyderabad, and there are like massive RFPs of INR 4 lakh, INR 5 lakh, INR 7 lakh kind of RFPs in these markets. We have been big beneficiaries of that. So, I have not seen any reduction in RFPs of the sizes within the GCC world.
Sure. My second question, Ramesh, on the 3.2 million square feet that is slated for delivery in Q4 across B8 Madhapur, B7 Airoli West, and Block 1 Pallikaranai, will the rents start commencing from Q1 FY 2028 itself, or is there a slight lag here in terms of when they start contributing to the NOI? As a follow-up, how much of the INR 17 billion-INR 18 billion of three-year organic NOI growth ambition is already secured by pre-leases, and how much is still dependent on future lease-ups? Lastly, until the last quarter, there was also a slide on sponsor pipeline, which is not there in the Q2 presentation. While you spoke about the active sponsor pipeline of 20 million square feet, are any of the sponsor assets currently under active consideration?
That is a lot of questions, Karan. Let us start with the rent commencement. Madhapur, where the B1 building, which is fully leased to a global banking GCC, rent is staggered start date. January 2027, around 43% of the rental starts. April 2027, around 25% of the rental starts. Then January 2028, another 33% of the rental starts. So, that is on B1. In terms of B7, B8, again, more or less the full building is leased except the last one floor, which is going to, like I mentioned, going to get signed any moment. Around 52% of leases for B7, B8 will start in October 2027. Around 30% will start in March 2028. The balance, some of it in early 2028, mid-2028, I guess. So, that is the rent start dates.
For our data centers, like I mentioned, rentals will start immediately, which is March for one data center, July for another data center next year, and December for another data center. These are the rentals which is coming next year. Sponsor pipeline, we actively look for various assets which the sponsor is developing right now. Sponsor has some very high-quality assets within Mumbai and Hyderabad and in Pune. We will continue to look at them. No active discussions right now.
Great. Thanks, Ramesh and Preeti, and greetings to the entire team for the festive season.
Just one more point, 3.7 million square feet out of the 6 million square feet which is under construction is pre-let, so there is zero leasing risk.
Yeah.
For that 3.7 million square feet.
Great. Thanks, Ramesh.
Thanks, Karan.
Thank you. Moving to our next participant, we have Yashas Gilganchi of DAM Capital Advisors. Yashas, please go ahead.
Good morning, team. Thank you for taking my question. Please help me understand the size of the opportunity you see for the acquisition of third-party assets. More specifically, of the institutional assets coming into the market, how many of these assets are well-placed to fit into Mindspace's portfolio, maybe in million square feet? What kind of cap rates are they being priced at? At what cap rates do you think they are attractive to you? What would make you consider acquiring these assets versus sponsor assets?
In my 27 years in commercial real estate, I have actually never seen so many institutional assets come up. We are looking at some really good opportunities. Obviously, it has to make sense from a cap rate point of view. I think today's cap rates for prime CBD trophy assets would be in that 7%-7.25% kind of a mark, and the non-CBD assets should be in the 7.7%-8% kind of a mark. If it comes too close to that levels, we will look at it. We are there in every asset which is being offered, especially after all the acquisitions of more than INR 10,000 crores, which we have done in the last two years. We keep looking at that. Cap rates obviously have to make sense, including making sense in the increased interest rate environment.
We don't miss out on any deal in the market which is available. We spend time, we evaluate it, we have very strong teams who will study these assets, and then we take a call whether to do or go no.
Got it. Thank you very much.
Thank you. Requesting participants to please click on the raise hand icon from the participants tab on your screen if you wish to ask a question. We will take our next question from Pritesh Sheth of Axis Capital. Pritesh, you can go ahead now.
Yeah. Hope I'm audible, and thanks for the opportunity. First question is on Chennai assets, strong leasing since the time we have acquired. How does the outlook now stand in terms of leasing? Would we be able to lease it out fully by end of this FY ? In terms of rentals, I think you quoted around INR 93 for upcoming deal that's been discussed for Commerzone Pallikaranai. You can correct me if I'm wrong, but overall, how do you see rentals catching up there for future leases that we'll do?
Perfectly played out. I remember some of you asking us after the Chennai deals. I remember in February, that was a market leasing at around INR 72, INR 73, and our strategy of controlling supply in that market by picking up two acquisition opportunities, it's exactly played the way we wanted to. The first deal was done at INR 85, then we have done deals at INR 87, we are doing deals at INR 90. Now we are close to signing up INR 93 a deal. That's exactly played out. Every time we do a deal, we try and increase it by INR 1, INR 2, INR 3 rupees, depending on the client profile and the size of the requirement. What's worked in our favor is, in Chennai today, DLF, which is not very far from us, again, in the OMR stretch, today quoting like INR 150. That's kind of helping us.
Other players in the market, like Sattva, Bagmane, they're also all quoting three-digit kind of numbers, which is also kind of helping us in this market. Like I mentioned in my speech, we hope that Chennai, the completed assets, so right now whatever is completed, that will get leased up by around March, April timeline. Then we will focus, starting next quarter, on B1, which is going to be ready. That's around INR 12 lakh sq ft. We'll start focusing on that. We've already started getting inquiries for that.
Pritesh?
That's helpful. Yeah, that's helpful. Second question on the valuation report. So, no change as of now on WACC and cap rate, but any sort of discussion or any risk that you immediately see when we again do this exercise in March in terms of WACC and cap rate increase, and would that offset the rental growth that we are seeing in our portfolio?
Cap rate, little early to say. That remains at 11.7% and 13% and cap rates of 7.5% and 8% that we have left unchanged. Rentals, again, I am seeing an upward trend in many markets because there is hardly any new supply which is coming up. I was reading the JLL latest report, where it said that relevant vacancy is less than 10%, with many cities seeing lowest vacancy numbers in, like, 15 years. That is kind of helping us. So rentals, we expect to go up in March. Too early to talk about WACC and cap rates for March now.
Just to add on the WACC and cap rates, WACC generally, if you see the trend over the last six years also, it is not that with every increase in the interest rates or every reduction, the value is keep moving. They generally wait for a reasonable time period to see where the interest rates are headed and then accordingly take a call on the WACC. So we will have to wait for a little bit to see in which direction are they going to move, because these are long-term rates which are being factored in the valuation.
Again, Pritesh, like Hyderabad, we have, I think, the rental valuations are done at INR 110. We have done deals at, like I mentioned, last deal happened at INR 133, and the current rental in the portfolio is INR 81. That shows the mark-to-market overall opportunity, so.
Sure, that is pretty helpful. That is it from my side. All the best and season's greetings to everyone in the team. Thank you.
Thank you.
Thank you. We will take our next question from Abhinav Sinha of Jefferies. Abhinav, please go ahead.
Yeah. Hi. Thanks for the opportunity. A couple of questions. Firstly, Preeti ma'am, on the increase in interest rates that you are talking about, what is your estimate that you have taken in while you are saying that 25 basis point is the likely increase in cost of capital by March? The benchmark rates, you are expecting to move up further?
Abhinav, we have given that number on a very, very conservative basis, assuming two more rate hikes in this financial year. If we have two more rate hikes beyond whatever we have seen recently, then we expect the cost to go up by 25 basis points. This is more from a conservative perspective. If that does not happen, then of course, we will save something.
Okay. Is it fair to assume that, say, for every 100 basis points hike, we will have roughly 50 basis points transmission in your portfolio? Is that sort of, I mean, on an annualized basis, is that a fair assumption?
No. No, I think it will be a little lesser than that. Because not everything, because almost 60% of the house is still fixed. We will have some bit of refinancing which will come across for the rest of the year and, of course, next year also. I don't think the impact will be so much.
Okay. So roughly the trajectory that we are seeing in DPU north of 10%, this is more or less repeatable, at least in the immediate future, I will say, two, three quarters?
Yeah. I mean, we don't give guidance, but that is what we maintained for so many quarters.
Sure. Sure.
We are hoping to.
Right. Ramesh, just a question on supply, but you were hinting that there are some micro markets where the supply is going up, but you are not seeing the impact, at least right now. Can you please highlight your thoughts on supply, which areas could be more at risk from a medium-term perspective?
Abhinav, we looked at the 37 micro markets in the country, and over the next two, three years, we studied which are the micro markets where there is going to be an oversupply kind of a situation. There are markets like, let's say, Hyderabad Financial District, where we have an exposure, but that is hardly any space left for us to lease. Mount Poonamallee Road, in two, three years, there could be a little bit of oversupply coming, but again, ours is 100% full. Mumbai CBD with a lot of supply coming up in BKC and Mahalakshmi, and all that is one of those markets where we could see a little bit of oversupply. But again, right now our exposure is, again, 100% in these assets. Occupancy is 100%. So there are these six, seven micro markets.
But over the years, Abhinav, what I have seen is, in the last 25 years, supply being significantly more than demand. I have only seen it in, like, four years out of those 25 years. Otherwise, demand has always been more than supply, or demand has been same as supply. And those four years, whether it was one year post dot-com bust, one year after GFC, and the two COVID years. Otherwise, we have always seen, and developers typically slow down supply if they see a lot of supply coming up. So that, again, kind of helps neutralize the market. I would not worry about supply too much right now.
Great. Thanks, and all the best to the team.
Thank you. We will take our next participant. We have Sumit Kumar of JM Financial. Sumit, you can go ahead now.
Hi, good morning. Am I audible?
Yes, Sumit.
Yeah, hi. Thanks for the opportunity. My question would be on the income support mentioned in the presentation. If you could give us the quantum of income support for the quarter. Given that leasing in Chennai typically has happened over the underwritten or higher than the underwritten rate, we do not see any risk there. Is there a possibility that this winds down and there is a loss of NOI maybe at Mumbai? How do you see that situation?
Sumit, on the income support, the quantum for this quarter is about INR 17.5 crores. If you recall, we had taken income support for the Pallikaranai asset, from two of the buildings, and also in the JP Morgan asset, which is in Kalina, which is below the current market rent. The income support is coming for these two assets of INR 17 crores during the quarter.
In terms of, I do not see much of risk there, Sumit, in terms of leasing, given that there is hardly any supply in Chennai in the preferred micro-market, so I do not see any risk. For B1 again, we are starting to see decent inquiries, 100,000 sq ft, 200,000 sq ft kind of various inquiries we are talking to. Not much of a worry there. Chennai, unlike Hyderabad, is not a kind of pre-leasing kind of a market. Our teams have done a good job of finishing the building earlier. Hopefully we will get the OC by January, and then we will actively start pushing it in the market.
That's helpful. Second question would be on the LTV. It's standard about close to 30%. In terms of the CapEx that we have for the next two, three years, it's quite considerable. How do we see that moving, or we expect significant sort of additions from the deliveries that we do over the next 12 months? How will that LTV number move?
Factoring the CapEx, I believe it still will be around these levels. I don't see it moving because of the portfolio values also keep increasing. They'll keep developing. The developments will start completing. We don't see that will happen unless we are doing any acquisition, then of course to that extent it can. Otherwise, it should remain at these levels.
Okay. Understood. One last question. What would be your target end FY 2027 occupancy for the portfolio?
Our target occupancy, we're looking at around the 97% kind of a mark. B1 again, what we originally thought the building would be ready by around April, looks like now it's going to be January, February OC. There'll be a little bit of a drag on the occupancy in the last quarter, but that will not have any reflection on NOI growth and DPU growth.
Okay. Thank you for the opportunity and all the best. Happy Diwali to you.
Thank you.
Thank you, Sumit. We will take our next question. We have Satinder Bedi of Eon Infotech Limited . Satinder, you can unmute your microphone and go ahead now.
Yep. Thank you for the opportunity. Congratulations on a set of great results once again. Preeti, I must appreciate the data book that you put out in Excel form. I think that is great corporate governance, okay? Congratulations for that. So, a couple of questions. So one, Ramesh, you said that 3.7 million square feet of the 6 million square feet under development is pre-let, so there is not much of a risk on that. So just wanted to understand the commitment from the lessee in terms of pre-let. So, what kind of a security deposit or commitment has he put on the table for us to feel comfortable that, should the market dynamics change quickly, he has got enough skin in the game? So that is one question.
Satinder, typically what we do is we charge around six months of security deposit, of which the tenants pay three months when we sign a binding MOU. The balance three months come at the time of lease agreement, which is your final contract, when they register the lease deeds and all that. It is not just signing a contract, Satinder. We do a lot of due diligence of our tenants, their financial capability. We study what has been their pattern of growth. I was shocked recently, there was a huge 900,000 sq ft deal which we did in B8, and I have not heard of that company, but when we checked, it is a $100 billion company. Another deal we did in Hyderabad, I have not heard of that company. It is a $60 billion company. Another deal we did in Hyderabad, I have not heard of the company name.
A $50 billion company. Many things we check. Every tenant we deal with has a detailed check, which our finance team does. Only after that, we get into a contractual commitment. These are all large global corporations, and it is not just a security deposit at play.
Okay. Yeah, that helps. Now, second, in terms of, like you have done very good pace-setting in terms of double-digit DPU growth, I think, which is a good aspiration for a REIT kind of a product. Given that there is enough of development pipeline on buildings and data centers happening, which will keep us busy and probably assist in this double-digit growth for the next 12 to 24 months, would it be a good idea to maybe go slow on acquisitions, given that interest rates are expected to be higher for longer? This might, from a timing point of view, might not be best of things to do, especially since we have a lot of organic high IRR return activity already going on. Just wanted your thoughts on that.
Connected to that, any particular micro market that you would love to be in that we are not there? You hit the right markets, even in terms of Pune micro markets, but any one micro market that Mindspace would love to be at?
Yeah. Satinder, good question on double-digit DPU growth. I was just checking the numbers. This quarter, obviously, it is 14.4% DPU growth. But in the last three quarters before that, we again gave 20%, 16%, and 18%. So last one year, again, DPU growth, if you kind of look at all the quarters, it has been like 14%. And in the last three years, we have again given an absolute 39% DPU growth. A good point on acquisitions. We do not want to acquire just for the heck of acquiring. It has to be accretive on all fronts. We are actually looking at expanding our footprint in the four markets where we already have a presence, and we look at quality, we look at tenants, and obviously, it should help unitholders from a distribution DPU growth point of view.
We typically discuss mainly with the institutional sellers where there is good infrastructure improvement opportunities also within the micro market. So, those are things we typically look at. But good point you mentioned about looking at future acquisitions.
Yeah. Thanks. Finally, last one, Preeti. So what are the components of the working capital change of INR 103 million in the NDCF waterfall? If you could just kind of amplify that, please.
So, that is largely your security deposits. Some, of course, the routine working capital asset liabilities, current asset liabilities, which keep moving. So, that is how the composition is.
Okay. So what component is security deposits, approximate?
It is almost INR 50 crore to INR 60 crore.
Okay. Fine.
Then, of course, there is some advance payment of property taxes and so on and so forth.
Yeah. Satinder, interestingly, this correlates to the question you asked. So, some of the deposits are coming from the pre-commitments that the tenants have made.
Yeah. No, great. I can understand. This does provide a tailwind to the DPU growth. The way you are growing, I think, so that's a great thing. Thank you. So, great execution. My only thing is, the execution has been so good that, sustaining a 15% growth is not easy, but all the best to you. All the best. Thank you.
Thank you so much.
Thank you.
Thank you so much. Ladies and gentlemen, we will take that as the last question. I will now hand it over back to the management for closing remarks and vote of thanks. Over to you.
Thank you, everyone, for attending the call, and very happy Diwali.
Wish you all a very happy Diwali, guys. Thank you so much for joining.
Thank you so much. Ladies and gentlemen, as we will take your leave, on behalf of Mindspace Business Parks REIT, that concludes today's conference call. Thank you all for joining us, and you can now click on the leave icon to exit the meeting. Thank you all for your participation.