Mindspace Business Parks (MREIT) delivered a resilient performance in H1FY21 with office rental collections of 99% and revenue/NOI of Rs 7.9/6.6 billion at a healthy NOI margin of 83.8%. The REIT has a stabilised rent-yielding office portfolio spread across Hyderabad, Mumbai Metropolitan Region, Pune and Chennai. With 89% committed occupancy and in-place rent of just Rs 54/psf/month, we like the company given 16% NOI CAGR over FY20-23E, a resilient leasing cycle for office assets in India’s tier I cities and low leverage of 0.2x net debt/equity which leaves headroom for injection of new assets in the REIT portfolio. We retain our ‘buy’ rating on Mindspace REIT with an unchanged March 2022 DCF based target price of Rs 358/unit. At CMP of Rs 305, we estimate NDCF yield of ~7% over FY22-23E of which over 90% is estimated to consist of tax-free dividends.
MREIT reported H1FY21 revenue and Net Operating Income (NOI) of Rs 7.9 billion and Rs 6.6 billion at a healthy NOI margin of 83.8%. The REIT has reported resilient rental collections of 99% in H1FY21 (in line with other listed peers) and has achieved gross leasing of 1.0 msf during the same period. The only dampener was early exits of 1.0 msf across the REIT’s portfolio (0.7msf for FY21E and 0.3msf for FY22E) which are over and above the expiries of 1.8msf each in FY21-22E. The REIT manager attributes this to tenants relocating to their own campuses (Deloitte and Capgemini). Of the total expiries of 2.5msf in FY21E (including early expiry of 0.7msf), the REIT has re-leased 0.6msf with another 0.8msf of lease renewal discussion at an advanced stage.
MREIT’s H1FY21 reported revenue/NOI are 47% and 51% of our FY21E estimates, respectively and we retain our FY21-23E estimates.
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