Q3FY24 Review: Mindspace REIT: SEZ de-notification to accelerate demand recovery

31 Jan 2024 , 10:47 AM

Mindspace REIT (M-REIT) reported another quarter of stable distribution; 9MFY24 was flat despite NOI being up 12% over the year-ago quarter. Blended occupancy moved up 120 basis points sequentially to 85%; although expiries for Q4FY24 increased by ~0.6msf. Post the SEZ de-notification announcement, M-REIT has already applied for 0.4msf at Airoli and expects to attain pre-COVID level occupancy over the next 2 years. 

Blended occupancy moved up 120 basis points sequentially to 85% driven by leasing at Madhapur Hyderabad, but partly offset by an increase in vacancy (to NIL occupancy) at Pocharam (also at Hyderabad). Committed occupancy, however, declined marginally 40 basis points sequentially. Exits/Expiries from the portfolio continued to rise, fresh exits of 0.6msf have been added in Q3. Total expiries for FY24 have almost doubled to 3msf since the start of the year, with 1.8msf being SEZ and remaining non SEZ, 90% of which has been re-leased.

M-REIT is looking to divest the 1msf Pocharam SEZ asset at Hyderabad, which has now NIL occupancy. Further, it is looking to acquire 42,000sqft at Commerzone Yerwada at ~8% cap-rate on in-place rentals.

Analysts at IIFL Capital Services expect M-REIT to benefit from a steady demand improvement with global captives increasing their presence in India, and a potential favorable interest rate environment.