Dear Unitholders,

It is with great honor and enthusiasm that I address you in my capacity as the new CEO of Mindspace Business Parks REIT. I take on this role at an exciting time and I am humbled by the trust and confidence shown in me by the Board of Directors to guide this esteemed organization into its next chapter of growth and success.

Inspired by the achievements and the solid foundation laid by my predecessor, Mr. Vinod Rohira, I am committed to building on his esteemed legacy and driving our Organization forward with a clear vision, strategic direction, and unwavering dedication to excellence.

Unitholders play a vital role in our journey, and we strive to create a culture of open communication, transparency, accountability and in the process, create long term value for all stakeholders.

Indian Economy: Good Times Ahead

I view India's current macroeconomic and microeconomic landscape with optimism. The robustness of the macroeconomic environment and thriving microeconomic conditions present significant opportunities for our industry. The prospect of a virtuous cycle of growth is exciting, as it signifies a period of sustained expansion and prosperity.

In the commercial office space, our industry is in a promising position, akin to the Goldilocks period. This phase of stability and growth presents ample opportunities for organizations like ours to capitalize on. However, as India continues it's journey of becoming 3rd largest economy of the world, it is evident that significant capacity building within the sector is essential to support this vision.

The robustness of the macroeconomic environment and thriving microeconomic conditions present significant opportunities for our industry.

Our focus must continue to be on fostering entrepreneurship and innovation within the real estate sector while effectively managing risks. From a regulatory perspective, I extend my support to initiatives that aim to streamline regulations, enhance transparency, and promote regulatory trust through collaboration between the industry and regulatory authorities.

An Office for the World

India has emerged as the go to destination for global office operations, solidifying its status as a key player in the international business landscape. With a growing economy, skilled workforce, affordable rentals, favorable business environment and policies, India offers excellent opportunities for companies seeking to establish or expand their presence in the region. With advanced infrastructure and technological capabilities, India is an attractive office destination for multinational corporations.

With a growing economy, skilled workforce, affordable rentals, favorable business environment and policies, India offers excellent opportunities for companies seeking to establish or expand their presence in the region.

Transformation of the Office Sector

The India office market had a good CY23. Office absorption increased by 12% compared to CY22. Over the last three years, India saw a total net absorption of more than 105 msf. Net absorption in 2023 was close to 43 msf, marking a four-year peak.

India’s office sector is in a transformative phase, marked by the evolving dynamics of the modern workplace. The expansion of Global Capability Centers (GCCs), rising uptake of office space by domestic enterprises, return of Work-from-Office, and the government’s SEZ reforms will significantly influence the commercial real estate landscape in India.

Favourable GCC Landscape in India

India’s compelling economic growth story led by the vast talent pool, cost arbitrage, and infrastructure upgrades in top cities has resulted in GCCs taking up office spaces in the country. According to JLL's research, GCCs now account for c.36% of all occupied Grade A stock across top seven cities, underscoring the pivotal role of tech offshoring across diverse sectors propelling demand within the country's office market. This sustained trend is anticipated to maintain India's office markets as among the most growth-oriented globally.

It is estimated that 500+ GCCs will enter India by 2026, taking the total count to over 2,300. GCCs currently occupy around 200 msf and the demand is expected to increase to around 270 msf over the next three years. Therefore, with promising factors at play, we are actively utilizing our expertise in GCC leasing to expand our portfolio organically to meet the increasing demand. Currently, 180+ GCCs are present in Hyderabad, an office micromarket where Mindspace REIT has a dominant presence.

The expansion of Global Capability Centers (GCCs), rising uptake of office space by domestic enterprises, return of Work-from-Office, and the government’s SEZ reforms will significantly influence the commercial real estate landscape in India

Domestic Companies at the Forefront

Domestic companies are driving the surge in office space demand in India. Such growth could be attributed to rapid governmental capital expenditure, growing consumption, and urbanization supported by favorable demographics. As per Colliers’ research, in CY23, domestic companies accounted for half of the total leasing across the top six cities. It is anticipated that an increasing number of domestic firms will seek office premises to accommodate their expanding workforce and encourage collaboration, thus amplifying the momentum in India's commercial real estate sector. The share of domestic companies in our leasing portfolio has risen from c.17% to c.31% in the last three years.

Return to Office Gains Momentum

Return to office has gained significant momentum in India. This transition has been embraced not only by domestic enterprises and entities within the BFSI sector but also by GCCs operating in the country. At present, our parks maintain a physical occupancy rate of around c.70%. Additionally, the post-COVID era has emphasized the necessity of providing sufficient office space with amenities to attract talent and encourage team collaboration, thereby boosting creativity and productivity. Tenants are significantly increasing their investment in workspaces to encourage employees to return to the office. This leads to enhanced loyalty and preference for Grade A space developers like ourselves.

SEZ Reforms Driving Occupancy Growth

We are extremely thankful to the Government of India for introducing amendments to the existing SEZ guidelines. The amendments now permit the demarcation of parts of an SEZ area into a Non-Processing Area after surrendering certain tax benefits availed earlier.

As per the new reforms, the SEZ area can be converted into an SEZ Non- Processing Area (NPA), earning an exemption from SEZ compliances. Such floor-wise demarcation will help leasing activities to meet the growing demand in the NPA space.

We are proactively capitalizing on the new rules under which we have already received the approvals of c.0.4 msf NPA conversion. Furthermore, we have filed for the conversion of approximately 1.5 msf of space to NPA. This strategic initiative is expected to lead to higher occupancy levels across our entire portfolio, particularly benefiting our business parks in Airoli.

Steady Growth and Strong Fundamentals

Our achievements in FY24 are a result of our efficient operations led by our skilled teams. We recorded c.3.6 msf of gross leasing during FY24 and achieved a re-leasing spread of 14.3%. Additionally, we added around 0.25 msf of completed area including an acquisition, bringing the total completed area of our portfolio to 26.3 msf. Our committed occupancy reached approximately 89.0%, and excluding our Pocharam asset (for which we received Board approval to initiate divestment process), our occupancy exceeded 90% as of March 31, 2024. Furthermore, our in-place rent grew to reach H 69 psf per month.

This led to a 13.7% y-o-y increase in revenue from operations to ` 24 billion and an increase in NOI by 10.9% y-o-y to ` 19 billion. We also announced a distribution of ` 11.4 billion or ` 19.2 per unit during the year. NAV of the portfolio grew by ` 8.6 per unit to reach ` 380.5 per unit. We raised ` 14.9 billion through NCDs and CPs at the REIT level. Our LTV is at a healthy 21.1%.

We recorded a 13.7% y-o-y increase in revenue to J 24 billion and an increase in NOI by 10.9% y-o-y to ` 19 billion.

Recognized for Our Performance

1. In the 2023 GRESB (Global Real Estate Sustainability Benchmark) Ratings, Mindspace REIT became the first Indian Commercial Real Estate Entity to receive 100/100 in Office Development benchmark earning the coveted title of ‘Global Listed Sector Leader’
2. Ranked 1st in Asia in the ‘Listed Companies Category’ for Commercial Business Development
3. Received a 5-star GRESB Rating for the second consecutive year
4. Scored 91/100 in the Standing Investment Benchmark, ranking 6th among real estate peers across Asia with a 5-star Rating
5. Received nine ‘Sword of Honour Awards’ from the British Safety Council for our commitment to Occupational Health and Safety, aligned with international benchmarks
6. Honored with Best Green Bond – REIT India award at The Asset Triple A Sustainable Finance Awards 2024 held at Hong Kong
7. Certified 'Great Place to Work' for the third consecutive year

Enhancing our Offerings

We continuously upgrade our buildings to enhance the overall experience, including revitalized lobbies, expanded open spaces, added amenities, and improved dining and recreational options. This includes newly opened cafes, restaurants, revamped facades, energy efficient lighting, lobbies filled with art, to enhance the aesthetic and visual appeal of common areas within our parks. Our ongoing developments include a c. 130,000 sq ft Experience Center designed to cater to diverse lifestyle and business needs, and a c.50,000 sq ft High Street at Mindspace Airoli East, promising convenience and comfort for occupants and visitors.

A World-Class Organization in Every Aspect

We strive to build a resilient institution for the future – one that focuses on quality, customer satisfaction, and the cultivation of trust. At Mindspace Business Parks REIT, we are actively embracing a shift in mindset to prioritize these key aspects.

To nurture a world-class organization, we have embraced a multifaceted approach that promotes excellence, innovation, and sustainability across all our operations. This approach starts with a strong commitment to foster a culture of continuous improvement, and empower every individual to contribute their best while offering them the support they need in their professional development journey.

Our relentless focus on quality and customer satisfaction involves consistently delivering exceptional spaces and services that exceed customer expectations, while also actively seeking feedback and implementing improvements to drive customer delight.

Additionally, we have prioritized investing in talent acquisition, development, and retention. By attracting top talent in the industry, offering them ample growth opportunities, and fostering a supportive and inclusive work environment, we are building a team of high-performing individuals who are deeply passionate about taking our REIT forward.

Our relentless focus on quality and customer satisfaction involves consistently delivering exceptional spaces and services that exceed customer expectations, while also actively seeking feedback and implementing improvements to drive customer delight.

Innovation is another key component of nurturing a world-class institution. We focus on encouraging creativity and out-of-the-box thinking, promoting experimentation and risk-taking, and harnessing emerging technologies and trends to stay ahead of the curve.

We are fully committed to our role in the areas of corporate social responsibility and sustainability. This involves actively engaging with and contributing to the communities in which we operate, while also implementing environmentally sustainable practices to reduce our impact on the planet.

Through a holistic approach that encompasses all aspects of the organization, from culture and talent to innovation and sustainability, we strive for excellence in all our endeavors, emerging as the leader in our industry.

Engaging with Tenants, Fostering Relationships

Over the years, we fostered our enduring relationships with tenants, as evidenced by the remarkable average duration of 11 years of top tenants presence in our parks. This longevity speaks volumes about the trust and satisfaction our tenants have in our services and the community we have built together.

We launched our 'Table Talks' initiative, a platform for open dialogue and collaboration with industry leaders. Our inaugural session brought together a diverse group of experts to brainstorm strategies for reshaping business parks. We explored critical topics like sustainability, well-being, and the transformative power of technology in real estate design and amenities.

I believe that by embracing innovation, fostering a culture of trust and collaboration, and advocating for sensible regulation, we can unlock the full potential of the sector and play a significant role in India's journey towards becoming the third largest economy of the world.

 

 

We have 9.3 msf of NOI growth opportunity, which includes our vacant area of 2.4 msf, area under development of 4.4 msf and future development area of 2.5 msf.

Note of Gratitude

I wish to express my appreciation to all the unitholders who have stood by us and enabled the execution of our business strategy. We have recorded consistent returns, and our unitholder base expanded to approximately 60,000 at the end of FY24. I am grateful to our tenants and all the stakeholders for their unwavering trust in Mindspace REIT. The Government and regulatory bodies have extended exceptional support in safeguarding the future of REITs as an asset class. They have proactively introduced the necessary amendments to bolster the sector and ensure its enduring prosperity. The invaluable guidance of the esteemed Board has supported us in upholding the highest standards of integrity and governance. Additionally, I extend my gratitude to our management team and all employees, who are the bedrock of the business we aspire to build and the milestones we aim to accomplish.

 

With warm regards,

Ramesh Nair

Chief Executive Officer