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Mindspace Business Parks REIT.

BSE: 543217 Sector: Infrastructure
NSE: MINDSPACE ISIN Code: INE0CCU25019
BSE 00:00 | 28 Sep 363.36 0.10
(0.03%)
OPEN

365.40

HIGH

366.85

LOW

362.50

NSE 00:00 | 28 Sep 362.99 -1.68
(-0.46%)
OPEN

367.85

HIGH

367.85

LOW

360.02

OPEN 365.40
PREVIOUS CLOSE 363.26
VOLUME 6824
52-Week high 388.00
52-Week low 294.00
P/E 19.50
Mkt Cap.(Rs cr) 21,548
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 365.40
CLOSE 363.26
VOLUME 6824
52-Week high 388.00
52-Week low 294.00
P/E 19.50
Mkt Cap.(Rs cr) 21,548
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Mindspace Business Parks REIT. (MINDSPACE) - Chairman Speech

Company chairman speech

CEO?s message

Dear Unitholders

It gives me immense pleasure to present to you our second AnnualReport.

The financial year began with the second wave of the pandemic whichbrought in stringent nationwide restrictions to combat it. However the year ended withthe Centre permitting states to ease most of the restrictions allowing them to marchtowards restoring balance in the economy. The government-led inoculation drives coupledwith lower infection rates aided in creating a positive impact and reinstating normalcy.Despite the challenges we have recorded one of the best years of leasing recordingvolumes of c. 4.5 million square feet (msf) in FY22. We have achieved healthy re-leasingspreads of 31% and our net operating income has grown bye. 8.2% year-on-year (y-o-y).

As organizations are moving back to working from offices we are readywith renewed vigour to partner with our tenants and becoming integral to their growthstories. At Mindspace REIT we are committed to build an ecosystem that helps attract andretain employees and offer them a collaborative platform to think connect and grow.

Future of office

Today both organizations as well as their employees have startedappreciating their workspaces more than before. Companies have realized that a workspaceplays an important role in shaping the culture of the organization by fosteringcollaboration innovation and growth. Employees too have come to realize the importanceof having a dedicated and distinguished work environment.

With each subsiding wave of COVID-19 we witnessed a healthy bounceback in leasing activity reiterating the integral role of physical office spaces. Whilethe third wave marginally deferred the back-to-office momentum we expect it to be back ontrack with many companies announcing return to work timelines with GCCs/GICs being thefront runners.

As employees start coming back to their workspaces they have startedto relish opportunity to collaborate brainstorm ideate and build camaraderie whileseamlessly weaving in the organization?s culture; an intangible which could not bereplicated in remote working models.

Operational performance

We have recorded one of our best year in terms of leasing. Our in-placerent increased by 10.3%y-o-y to Rs. 61.7 persq. ft. per month. In addition our ROFOassetsalso witnessed elevated leasing momentum recording leasing of c. 2.9 msf during the yeartaking the cumulative leasing to c.7.5 msf across the REIT and ROFO portfolio.

Large occupiers are leading the inquiries to scan the marketplace fortheir long-term back-to-office footprint strategies. As a result the demand forunder-construction assets is strengthening. To quote few examples our entire building ofc.0.67 msf inCommerzoneKharadi Pune has been pre-leased to a single tenant. Our ROFOasset Commerzone Madhapur Hyderabad with a leasable area of c. 1.8 msf was also entirelyleased to a marquee global tenanl and an entire under-construction building of c.0.7 msfat our ROFO asset Commerzone Pallikaranai Chennai was also pre-leased. This demand forlarge spaces is encouraging us to advance our future development timelines.

Our committed occupancy for the year was 84.3%. Additionally if weinclude all the pre-leasing in our underconstruction assets the committed occupancy risesto c.85.0%.

Augmenting assets enhancing growth

As envisaged occupiers today do not want to compromise on assetquality and asset management as they restart their journey towards office occupancy.There is a strong desire to provide work environments to their employees which promotewellness and offer ample recreational spaces entertainment zones and hassle-free accessto transportation nodes. Work-life balance today has become far more important and workenvironments that can provide this balance are witnessing traction. We had anticipatedthis trend to play out and have been upgrading our parks to cater to the change inpreferences. To quote one such example we have recently inaugurated the one km longskywalk within our Mindspace Madhapur at Hyderabad allowing seamless connectivity fromthe metro station directly to our office buildings. The skywalk has not just helped toreduce the discomfort caused by vehicular traffic to pedestrian movement but has also ledto significant reduction in carbon footprint generated by last mile transportation as wellas reduce the noise pollution and traffic within our parks.

The skywalk also houses Vantage Cafe that hosts kiosks and breakoutspaces providing for food recreation and entertainment zones.

We have also initiated development of similar experiential andaspirational offerings at our other parks. We have commenced construction of anentertainment and recreational center at Mindspace Madhapur Hyderabad and a high streetexperience for food entertainment and retail at Mindspace Airoli East Mumbai region.

We have brought forward the timelines for a new building at CommerzoneKharadi Pune and have commenced the work on redevelopment of c.0.36 msf old officebuilding at Mindspace Madhapur Hyderabad business park which would be replaced by astate-of-the-arte. 1.3 msf modern office building. For our new building at CommerzoneKharadi Pune the revised Floor Space Index norms has increased the leasable area of ournew building from c.0.6 msf toe.1.0 msf. The total leasable area of the REIT portfolio hasnow grown to 31.8 msf up from 30.2 msf at the end of FY21.

We are evaluating opportunities to add new assets while beingcognizant about incorporating deals that are value accretive to our unitholders. We havereceived the ROFO notice from the sponsors to acquire a fully leased c. 1.8 msf asset inMadhapur Hyderabad. This asset is located close to our existing Mindspace Madhapur Parkand complements our existing offerings. Basis the approval received from the GoverningBoard to evaluate the opportunity we have on-boarded advisors and the due diligence isin progress.

Building a sustainable future

It has been our purpose to protect our communities and the planetthrough responsible practices. As an organization our growth has been in tandem with ourESG commitments. We are constantly working towards building and strengthening effectivemethods that minimize environmental impact without compromising on design and quality. Indoing so we are committed to setting new benchmarks. We were the first Indian real estateentity to join RE100 and EV100 initiatives.

Our properties have been certified with LEED CM - IGBC NB GoldPlatinum and Wellness certifications and have won British Councils prestigious‘Sword of Honour? awards across multiple assets which is a testament to ourcommitment towards maintaining the highest environmental standards. Currently c.77.3% ofour operational portfolio is‘ Green Certified? by LEED or IGBC.

On the social front we are deeply committed to delivering safetyinclusivity and growth of the communities we operate in along with that of our employeesand occupiers. In the neighbourhood of Mindspace Madhapur at Hyderabad we have completelytransformed the Durgam Cheruvu lake in Madhapur from a stagnant dying waterbody into avibrant lake ecosystem with well-planned walkways and gardens. We have also fortifiedsecurity at the Lake with circumference fencing watch tower and closed-circuit televisioncameras. It has now become a recreational spot and a landmark that the local populace isnow proud of. We invested time and resources in ensuring its upkeep and maintenance eventhrough the lockdown.

Our human assets are at the heart of everything we do. We invest in thewellbeing of our workforce and strive to create a conducive work environment. We launchedthe ‘Reach Out? initiative to provide one-on-one professional counselling to ouremployees and their families with a view to promote mental wellbeing. Gender diversity isimperative for us and our efforts to develop the same have resulted in a 27%representation of women in management workforce which is one of the highest in ourindustry. We are launching our ‘Relaunch? program a gender agnostic policyaimed at hiring talent which has taken a work-break due to various reasons. We are proudto announce that we are now ‘Great Place to Work?-Certified by the Great Placeto Work Institute for March 2022-23.

We believe that a robust governance strategy is critical to ensure thelong -term success of an organization. We have built a strong governance framework byimplementing various corporate policies and processes. Additionally our governancestructure has also been established to ensure the successful execution of oursustainability efforts and monitor the impact created by them.

Aligned with our purpose of building a holistic ecosystem we havedeveloped an ESG framework that prioritizes environmental wellbeing societal developmentand mainstreaming the principles of rightful business conduct. Our framework is based onthree key pillars 1) Resource Conservation and Efficiency 2) Employee and CommunityRelations and 3) Responsible Business Conduct. We have also set ourselves stringentquantified targets in the field of emission reduction green portfolio gender diversityand safety. These targets are further elaborated in the ESG section of this report.

Looking ahead

Despite listing during pandemic and facing two more lockdowns ourleasing teams have managed to leasee. 8.1 msf over the last two financial years FY21 andFY22. This instils remarkable confidence on the strength of our leasing teams.

In the near future we expect leasing demand to be driven by threemajor factors - record hiring in technology companies further enhancement in India appealas a destination to setup GCCs/GICs and accentuation in demand towards institutionallyowned Grade A assets with best asset management.

Speaking of each factor in-depth the IT industry in India has reachedanother inflection point led by increased spend on digitization by companies globally.Unlike the previous inflection point of Y2K which was led by low- cost labour arbitragemodels this time around it is led by intellectual value-added services like - dataanalytics cloud management machine learning and artificial intelligence among others.The record addition to headcounts of IT companies in India is testament to the renewedgrowth prospects. As per NASSCOM reports the headcount of IT companies is expected tocross c. 5.1 million in FY22 reaching a record high. The industry has added c. 445000employees in FY22. This hiring is expected to translate into significant addition tooverall new leasing demand.

On the GCC/GIC front India?s ability to deliver even during thepeak of the pandemic has won it accolades from businesses globally. An increasing numberof companies have started looking at India to setup their GCC/GICs. As per NASSCOMreports India had 1430+ GCCs at the end of FY21. This count is expected to grow at aCAGR of 6%-7% to reach 2000+GCCs by FY25. In the same period the headcount of GCCs isexpected to grow 2x at a CAGR of c. 12% reaching c. 2 million by FY25.

The last two years have seen a turnaround in the definition of a GradeA asset. Occupiers are now keen to shift out of strata-sold assets given their challengesto negotiate with multiple landlords. Consequently they are clear with who they want tobe associated with and are willing to pay a premium for institutionally owned and managedbusiness parks.

Analyzing the start and end of financial year fortifies our confidenceof growth as we enter the new financial year. It promises a stronger year in terms of apotential upsurge in occupancies.

The Union Budget acknowledged the importance SEZ has had on the Indianeconomy. We expect the policies to be suitably reformed during the upcoming financialyear. The strong leasing demand we are seeing for our de-notified buildings gives usconfidence to lease out the vacant SEZ spaces post the amendment. With large occupiersfirming up their back-to-office plans we expect smaller ones to follow suit. We areexcited about the mark-to-market opportunities in our portfolio.

Note of gratitude

I would like to thank our stakeholders who have been our committedpartners in progress. I also want to extend sincere gratitude to our unitholders forbelieving in our business our ethics and our promise of creating lasting value. Ourgovernment stakeholders and regulators have given us direction and their efforts to createa conducive regulatory environment has helped the growth of REITs in India. The members ofthe Governing Board of our Manager have been the guiding light to uphold the higheststandards of governance. Our strong network of suppliers and vendors has ensured timelyand quality deliveries to help us build assets that match global standards. Our tenantsby choosing us as their partner of choice have always placed their unwavering faith inus. This has allowed us to curate the best-in-class assets matching their needs. I thankyou for your trust and unshakeable support. And lastly I thank our management team andall our employees who are our most invaluable assets for tirelessly striving to build atop-notch business.

Sincere regards

Vinod Rohira

CEO Mindspace REIT

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