Brookfield India Real Estate Trust REIT (NSE:BIRET) Q1 FY23 Earnings Concall dated Aug. 04, 2022
Corporate Participants:
Ankur Gupta — Managing Partner
Alok Aggarwal — Chief Executive Officer
Sanjeev Kumar Sharma — Chief Financial Officer
Analysts:
Rajiv Malhotra — Skanda Investments — Analyst
Mandeep Singh — Ambit Capital — Analyst
Puneet Gulati — HSBC Bank — Analyst
Manish Agrawal — JM Financials — Analyst
Kunal Tayal — Bank of America Merrill Lynch — Analyst
Sameer Baisiwala — Morgan Stanley — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Brookfield India Real Estate Trust Earnings Conference Call for Q1 FY ’23. [Operator Instructions]
On the call we have the following persons: Mr. Ankur Gupta, Managing Partner, Brookfield Asset Management and Director, Brookprop Management Services Private Limited; Mr Alok Aggarwal, Chief Executive Officer, Brookprop Management Services Private Limited; Mr. Sanjeev Kumar Sharma, Chief Financial Officer, Brookprop Management Services Private Limited; and Mr. Rachit Kothari from Brookfield.
I now hand the conference over to Mr. Ankur Gupta. Thank you, and over to you, sir.
Ankur Gupta — Managing Partner
Thank you. Good afternoon everybody. A very warm welcome to our first quarter analyst briefing call. And as always we are thankful and grateful for your time and for your participation and for your support to our business.
Quarter one for this fiscal year is off to a fantastic start in our business. This quarter can be described as advancements of our business plan in terms of organic growth, a combination of strong re-leasing spreads, as well as occupancy gains. And characterized by a return to office for most of our tenants, which was resulting in space take-up by new tenants of course, but also majority of space take-up coming in from existing tenants. We continue to show stewardship in advancing our ESG plan or the portfolio that the management team will talk about in detail on this call. But overall, very pleased with the performance of our business as the start to this new fiscal year.
And I’ll request Alok Aggarwal, the CEO of the Manager of the REIT to take you through the results of this quarter that we are reporting today.
Alok Aggarwal — Chief Executive Officer
Thank you, Ankur. A very good afternoon to everyone. I am please to say that the robust recovery we saw in the second half of FY 2022 is only continuing and extending. We are seeing return to office trend playing out across the country. The steady uptake in physical attendance as we have witnessed at our assets coupled with robust hiring by tech companies over the last couple of years bodes well for the demand for commercial real estate in India.
We witnessed strong leasing demand across our assets this quarter with 311,000 square feet of gross leasing at a re-leasing spread of 27%. Additionally we also signed about 94,000 square feet of expansion options during the quarter. Over the last three quarters, we have achieved a total new leasing of a million square feet, which is higher than our average new leasing run rate prior to COVID pandemic. While last year’s leasing was predominantly driven by relocation and consolidation, we are now seeing expansion demand from our existing tenants with 85% of the new leases this quarter being signed with existing tenants.
This strong leasing demand has been accompanied by healthy rental growth, while we had achieved a re-leasing spread of 11% for financial year ’22, in the last two quarters we have been able to achieve re-leasing spreads of 27% in each quarter. This is driven by greater leasing demand as more employees return to office and realization of mark-to-market headroom in our Powai asset.
Before the pandemic, we typically witnessed 2 million to 2.5 million square feet of net leasing every two years in our assets. It’s 0.3 million square feet of expansion option signed and 1.1 million square feet of ongoing lease in discussions, we are hopeful of continuing our pre-COVID net leasing run-rate, which should help us achieve our stabilized occupancy and our organic growth target. We have already achieved a 6% growth in our NOI run rate in this quarter and continue to have an embedded growth headroom of 15% to 20% till stabilization.
With a strong leasing that we saw during the quarter, we have through the strong leasing we have achieved an effective economic occupancy of 89%. Our existing leases also delivered robust embedded growth with 9% average escalation on 1.1 million square feet during the quarter. Rental collections remained strong at 99% for the quarter. We have also completed the 1.55 lakh square feet of Tower 11A in N2 in May ’22 which is covered under the income support from the Sponsor Group.
The REIT has an effective pipeline of inorganic growth opportunities, Candor TechSpace G1 is fast approaching stabilization. Also the rent limiting assets approaching 2.7 million square feet in the Powai Business District, a part of the ROFO Assets and are undergoing a carve-out. We believe that these high-quality assets could have a significantly positive impact in broad-basing our REIT if we were to acquire them. The combined portfolio would lead to a 16% decrease in the top 10 tenant concentration and would improve the weightage of Mumbai to one-third of the portfolio.
We have taken significant steps towards our goal of achieving industry-leading sustainable development. We have replaced about 15% of the AHU fans and filters in G2 to enhance energy efficiency by 25%. For these replacements, we also sponsored a Zero Waste Run at Powai as part of our launch of the break the plastic initiative, attracting 2,000 plus participants to the event. We have completed the submission for the GRESB scores in FY ’22 and are on track to fulfill the commitment to establish de-carbonization goals based on Science Based Target Initiative, SBTi. Our efforts at Candor TechSpace N1 and K1 were recognized by the CII, as we won the CII Inter Industry Kaizen Competition. We are on track to end FY ’23 with lower energy consumption, lower greenhouse gas emissions, water usage and solid waste generation in FY ’22. This is despite the addition of N2 to the portfolio. We continue our efforts to deliver long-term value to our business, partners and communities.
Now, I would like to invite Sanjeev to provide the financial update.
Sanjeev Kumar Sharma — Chief Financial Officer
Thank you, Alok. Good afternoon everyone. I am pleased to announce that the Board has approved a distribution of INR171 crore, means INR5.10 per unit this quarter. The tax free component of distribution this quarter is 52%, which is in line with our stated target. We have achieved an NDCF of INR172 crore, means INR5.13 per unit, which is in line with the guidance provided last quarter. Factoring in the recent re-leasing success and strong cash flow generation from existing leases, we believe we will be able to comfortably maintain our NDCF guidance and our distribution run rate.
Our operating lease rentals for the quarter are INR203 crore, which is 26% higher than the same period last year. The adjusted NOI including income support from Sponsor Group for the quarter is INR235 crore, which is 38% higher than quarter one financial year 2022. This growth is primarily driven by the addition of Candor TechSpace N2 into the portfolio and the improvement in our CAM margins. We had highlighted in our last quarter’s presentation that our assets have significant organic growth potential with a potential to enhance our net operating income by 20% to 25%.
As Alok mentioned earlier, we have already delivered a growth of 6% in our NOI run rate over the previous quarter. This has been achieved through a combination of contractual escalation, recent re-leasing success and margin recovery in this quarter. In fact our NOI margin improved from 103% in quarter four FY 2022 to 107% in this quarter, primarily driven by some of the occupiers moving to higher hours of operation and the higher physical attendance we have seen at our assets. We hope to continue to deliver strong organic growth over the next three quarters and achieve a stabilized income profile of our assets. We continue to maintain a strong balance sheet with 31% loan to value and AAA stable rating from CRISIL. We continue to have ample liquidity with nearly INR310 crores of undrawn limits.
With this, I would request the moderator to open the floor for Q&A. Thanks everyone.
Questions and Answers:
Operator
Thank you. [Operator Instructions] The first question is from the line of Rajiv Malhotra from Skanda Investments. Please go ahead.
Rajiv Malhotra — Skanda Investments — Analyst
Good afternoon, everybody. These were fabulous set of…
Operator
Mr. Malhotra, you’re sounding very soft.
Rajiv Malhotra — Skanda Investments — Analyst
Is it better now?
Operator
Much better. Thank you.
Rajiv Malhotra — Skanda Investments — Analyst
Yeah. Thank you. Good afternoon guys. I think the numbers were absolutely outstanding. So a great quarter for everyone. I have two questions, one is on Candor G2. Is there some sort of weakness we see in G2 because the re-leasing also seems to have happened at a 9% discount. Again on G2, we are doing some developments in the food court and gym. While in the offer document, we were talking of some new tower which is to be built there. Can I have your color on that?
Alok Aggarwal — Chief Executive Officer
I can take this question, Rajiv. So Rajiv, in G2, yes, we closed with a slightly lower number. But this was with an anchor tenant and discussions has been going for quite some time and discussions kind of started two quarters back. And you are aware that tenants take bit of time to close the leases. So — and about two quarters back bit of a negotiation happened. And we did closed at a lower number. But overall, we have — our sense is, on a average, we should be able to kind of surpass that business plan when we do the further leasing. And that’s what we always do about one-third it could be at lower number, balance one-third is at the business plan number and one-third could be to upside. That’s the normal trend we follow also, I mean at many times. So that’s answer to the first question.
Second thing is, I’m not aware of a new tower in G2, but yes, we are doing — we are enhancing the capacity of food court. And we are enhancing the capacity of gym because there has been a request from our tenants, as when they take the space that they would need more space in food court. And gym has been a big attraction actually. The existing gym is not sufficient to house all that people who want to participate or go for the exercises. So it’s more of a amenity we provide and that we always do to attract and cater tenants and remain committed.
Rajiv Malhotra — Skanda Investments — Analyst
Okay. One thing on G2 from the original acquisition of this asset into the REIT, this is more of a agreement to use asset where the land is not in our name — in the Trust’s name. And also the original developer holds lot of space. Is it not fruitful for the Trust to get the land because this is India, India can — anything can happen, right. So isn’t it great to have the land back into the Trust name and try to buyout the balance share of that original developer?
Alok Aggarwal — Chief Executive Officer
So our contractual position in this asset has been maintained for many, many years and enjoy a fantastic relationship by our partner here. While — so — while the land ownership is not in the Trust, the contract that governs our right to enter this land is perpetual and operate. And our share of the area/revenue is also perpetual in nature. So I would classify it as a fantastic agreement that we have with a well- dependable partner. In future, if something were to change, both parties have to come to a table. And we don’t see any requirement or motivation from that front at this point between the two parties.
Rajiv Malhotra — Skanda Investments — Analyst
As of now there is nothing going on…
Alok Aggarwal — Chief Executive Officer
Yeah, but our right as a partner here are rock solid.
Rajiv Malhotra — Skanda Investments — Analyst
Okay. Okay, great. So one last brief question on K1. K1 we are doing a mixed use development, are we to understand this is non-SEZ and outside this thing, any reason for doing that? Also in your term sheets, you had shown that the same G2 developer is going to be a partner in K1 for this mixed use. Any particular reason for making it like this?
Alok Aggarwal — Chief Executive Officer
So look, it’s a very large asset. And the fact that this part of the land does not have the same restriction as the other land parcel allows us to add amenities and mixed-use portion, which has a very strong — our market research suggests has a very strong demand. So we are — so we embarked upon that plan, and are in the pre-development mode there.
As I said, our relationship with the JV partner is solid, and they express interest in coming into a small portion of this development, which also help de-risk this development from an execution perspective. So I hope that answers your question. And just as a request to the moderator, because we are — because we have limited time, if you can limit questions to one or two per person. And then the — and then if anybody needs to get back in the queue, they can do so.
Rajiv Malhotra — Skanda Investments — Analyst
Yeah. Thank you. Thank you, guys. Thank you for your answers.
Alok Aggarwal — Chief Executive Officer
Okay.
Operator
[Operator Instructions] The next question is from the line of Mandeep Singh from Ambit Capital. Please go ahead.
Mandeep Singh — Ambit Capital — Analyst
Yeah, hi. Thanks for the opportunity. So firstly, can you help us understand how the physical occupancies have ramped up across your portfolio assets? And if you could provide some sense on micro-market wise break up?
Alok Aggarwal — Chief Executive Officer
Yeah. So also physical occupancy of course, they kind of a bit vary from asset to asset and micro-market to micro-market. Wherever we see large tech companies, their occupancies are a bit lower actually because they are providing more flexibility to their employees for next two quarters to three quarters. There are smaller companies and mid-sized companies, they are inquesting to the employees to please attend the office, at least 50% attendance they want, you know, on a given day. So our occupancies would be in range of, I would say, 35% to 50%. And if you really see like in Bombay — in Bombay where we have Kensington, we have one large company occupying substantial portion of the space, where the occupancies are lower about 30%, 35%.
In Gurgaon and Noida, and especially in Noida occupancies are high. They could go up 45% to 50% because they are smaller companies, and they are insisting that people have to attend offices. They have almost kind of a mandated 50% occupancy on a given day. Calcutta again, it’s the large tech companies, large IT companies, they are taking more time to insist on the employees to come back to offices. So again, Calcutta they are a bit lower prices. So Bombay is lower for the last tenant being there, Calcutta is bit lower. And Gurgaon and Noida occupancies are higher, almost setting 50% in Gurgaon, also in Noida also.
Ankur Gupta — Managing Partner
And if I may just add, globally we are seeing the massive preparation to be almost entirely in terms of the companies getting back to work post summer, which is Q3 of the calendar year. And then most organizations have laid out plans for that for most of the employees to be back in physical offices, starting end of this summer.
Mandeep Singh — Ambit Capital — Analyst
Sure. This is really helpful. And secondly, if you could just help us with micro-market wise broad split for your 1.1 million square feet of ongoing leasing discussion. That will be helpful.
Alok Aggarwal — Chief Executive Officer
Yeah, so if you really say a part of, you know, you want a break up kind of a thing?
Mandeep Singh — Ambit Capital — Analyst
Yeah.
Alok Aggarwal — Chief Executive Officer
Yeah, so if you really see, in Noida, we have in Noida and one we have about three lakh square feet in about, Calcutta we have about a lakh square feet. In Bombay we have again about 1.5 lakh. Then in Noida, which is N2, we have almost about 0.45 million square feet. Then if you really see in G2 we already have about 0.35 million of hard options. So that is in addition to this 1.1 million. So they would kind of — they also — actually that’s a part of leasing decisions, so they would come and people would at least 50%, 70% — 60% to 70% would renew. So it’s spread across assets, but of course it’s stronger in Noida right now. And Calcutta is low end of spectrum.
Mandeep Singh — Ambit Capital — Analyst
That’s really helpful. I’ll just come back in the queue for the follow-up. Thank you.
Operator
Thank you. We’ll move onto the next question, that is from the line of Puneet from HSBC. Please go ahead.
Puneet Gulati — HSBC Bank — Analyst
Yeah, thank you so much. Good afternoon and congratulations on good distribution. My first question is, if you can give more color on what are you seeing in terms of market rentals, at least in Mumbai we saw a good 113% leasing spread. Can you indicate what were the indicated rentals there?
Alok Aggarwal — Chief Executive Officer
Yeah, so Mumbai is, you know, kind of, we are crossing INR125 kind of a rental, that’s at least we are getting INR125, INR130 kind of rentals. And it’s a small lease, we probably will push it higher. But for large and medium size lease, it could be around INR125, and that’s something — I think that’s something kind of a floor, I would say, around that INR125 is becoming a floor in our [Indecipherable]. In N1 I think the ramp-up has been strong, we are kind of almost now touching, you know, what has been done, okay, that could be a lower number, but you know, going forward it could touch INR58, INR60, even cross that.
Puneet Gulati — HSBC Bank — Analyst
And sir, including CAM, excluding CAM?
Alok Aggarwal — Chief Executive Officer
No, CAM is only separate. I mean CAM is always separate. I mean, that’s something we never count.
Puneet Gulati — HSBC Bank — Analyst
Okay.
Alok Aggarwal — Chief Executive Officer
So, yeah, so Noida it could be, N1, it could be around touching INR58, INR60. N2 it would cross INR60. Calcutta is around between INR42 to INR45, I mean that’s something maybe that’ll stay at, INR40, INR41, INR42, but it’s around that. And G2, yes, we are closing with INR80, we are also closing above INR90 on a smaller space, but with little area left in G2, I think we can cross — it should be inching towards, I would say, three digits actually depending on the size of tenant and size of the area we lease.
Puneet Gulati — HSBC Bank — Analyst
Interesting. So if I look at your rentals in-place expiry for the balance of this year, they are pretty much there right? It’s N2 which is still INR60 and INR52 and N1 is there. Kolkata is pretty much there, Kensington obviously is 111 expiring at 125. So what kind of leasing spread should be run rate for the balance of the year?
Alok Aggarwal — Chief Executive Officer
So we would say that, we should be able to maintain the re-leasing spreads depending on how much we do in each assets. But I think last two quarters we have been able to get 27%, which was 11% last one year. So I think this is a particular number. But I think it should be above 20% I think on an average, but it depends on how much we lease-in each asset and what are the size of tenants. But I think we can get above 20% around that number as a…
Ankur Gupta — Managing Partner
And Puneet, this is Ankur. Across the board with inflation and other factor, commodity pricing et cetera, the re-leasing spreads will actually get wider once our leasing cost is 90 plus on a portfolio basis. And competition on new supply cannot even afford to be at these numbers at a break-even level, right? So…
Puneet Gulati — HSBC Bank — Analyst
Are you seeing early signs of that as of now?
Ankur Gupta — Managing Partner
So for sure. Traditionally Powai was being leased in, I would say, between 110, 115, now we are talking about 120. So benchmark itself is moving up. Similarly Noida, Noida addition was INR40 market, then moved to early 50s, now it’s late 50s early 60s. So look, trends are there. And in fact I would say, commercial real estate has had not much rental growth to show forth simply because the leasing volumes have been lower. Now in this new regime with slightly higher inflation, I would say the numbers will look different is our expectation.
Puneet Gulati — HSBC Bank — Analyst
Interesting. N2’s occupancy has dropped a bit on a quarter-on-quarter basis, anything to read there?
Alok Aggarwal — Chief Executive Officer
No, so, I would say, leases can be lumpy at times, we have been fantastic leasing in N2, you know, last year at the peak of pandemic, and I think discussions were on, I mean, so there could be a — this is a temporary dip. We are confident that…
Ankur Gupta — Managing Partner
A large part of it, actually going to happen because we delivered 150,000 square feet of new area in the past.
Puneet Gulati — HSBC Bank — Analyst
Okay, okay. So…
Ankur Gupta — Managing Partner
That’s about, call it, 5% of the overall sort of area in the past.
Puneet Gulati — HSBC Bank — Analyst
Understood. That’s very helpful. And lastly, just a bit of accounting thing to sight. So there was a 85 million of non-refundable advances, why was it classified below cash flow for operation? Should it not be a part of cash flow of operation the way brokerage and bid deposits are expensed out?
Sanjeev Kumar Sharma — Chief Financial Officer
Puneet, it is accounting term wise below operations, it is considered as technically an equity contribution. That’s why it is not shown as a operations income, because whatever revenues or profits will be generated out of this project in future once it gets operationalized, that will be given to the partners. So, technically, it’s equity.
Puneet Gulati — HSBC Bank — Analyst
Sorry, I didn’t understand this. And I think what are these non-refundable advances here? I thought we were more in the refundable deposits.
Sanjeev Kumar Sharma — Chief Financial Officer
This is non-refundable deposits, which we are getting from the partners in 3-acre development, mixed use development happening in the Kolkata K1. Where 28% of revenue will be shared with the partner. And 78% is going to be with us.
Puneet Gulati — HSBC Bank — Analyst
Understood. That’s very helpful. Thank you so much. And all the best.
Operator
Thank you. The next question is from the line of Manish Agrawal, from JM Financial. Please go ahead.
Manish Agrawal — JM Financials — Analyst
Yeah, hi, good afternoon. My first question would be pertaining to the margin profile, NOI margins. So this quarter we have reported 107% on a blended basis. While last quarter it was 105%. So should it stabilize at these levels or can it go even higher across assets as CAM margins improve, as physical occupancies improve?
Alok Aggarwal — Chief Executive Officer
Manish, if we talk about the pre-COVID scenario, the percentages were in the range of 111% and 112%. And we expect when the physical occupancy will be — we will stabilize, we will be able to achieve the similar percentage. And that’s why we even in our presentations have mentioned that there is still a scope of improvement in the operating margins. And overall 17% to 18% NOI increase will be there once operations are stabilized as well as our vacant area is leased in.
Manish Agrawal — JM Financials — Analyst
Sure. Understood. Second question would be, on the same-store expiries, they have increased by 53,000 square feet. If you could help us understand the nature of this expiry?
Alok Aggarwal — Chief Executive Officer
We had last — So see, in terms of expires, we have about 27,000 as it increased last quarter. We had 84,000 renewal, out of 60,000 has been renewed and 27,000 has been expired.
Ankur Gupta — Managing Partner
So I’ll add to that, basically one of our occupiers in the Noida assets has decided to let go of first floor. So that’s really the reason for the increase. So this particular occupier is currently has decided to let go off first floor as their lease expired and — they give us a termination notice on first floor. And that’s why you had that increase in the expiry.
Manish Agrawal — JM Financials — Analyst
And they are shifting to some other property or they are rationalizing space internally?
Alok Aggarwal — Chief Executive Officer
They are rationalizing space internally. I mean, who knows, they can come back also. Yeah, right now 6 months to 9 months lot of tenants are rationalizing space.
Manish Agrawal — JM Financials — Analyst
Sure. Sure. Thank you. That’s all from my side. All the best.
Operator
Thank you. The next question is from the line of Kunal T from BofA. Please go ahead.
Kunal Tayal — Bank of America Merrill Lynch — Analyst
Sure. Thanks. My first question is that, the opportunities under discussion that you’ve put forward. It’s a good absolute number, but the quantum seems to be unchanged from last quarter if you adjust for the signings you’ve had. Now given that the quarter did see a lot of RFPs, just wanted your thoughts as to why that might be?
Alok Aggarwal — Chief Executive Officer
Sorry, can you repeat the questions? I’ve not understood, can you please.
Kunal Tayal — Bank of America Merrill Lynch — Analyst
Okay. If you look at your ongoing leasing discussion, the number is 1.1 million. I believe last quarter this was 1.4 million, 1.5 million. So adjusted for the signings you have had in the quarter of about 0.3, you’re saying that nothing new came into the pipeline as such. Just wondering as to why that might be?
Alok Aggarwal — Chief Executive Officer
No. Okay, sorry. See, how it happens is, you know, and we can compare tenant wise tenant and opportunity wise opportunity. Sometimes there is a out of 1.1 million square feet, we have closed 3 lakh square feet. Some tenants probably would not have signed or they could have further delayed. And a lot of new tenants did added up. Now it’s just a question of — it’s just a matter of coincidence that is 1.1 million, remains 1.1 million, that’s how it is.
Kunal Tayal — Bank of America Merrill Lynch — Analyst
You’re saying, there could have been some churn from the pipeline last quarter.
Alok Aggarwal — Chief Executive Officer
Yeah, churn happens and people come back also, I mean, we only talk about active leases, sometimes will also get slow. So this is a bit of a dynamic market. We only talk about active leases. And who knows when something gets active, but right now active discussions are 1.1. And then we have about 0.35 hard option. So I would say, overall about around 1.5 million square feet. That’s how we should look at it.
Kunal Tayal — Bank of America Merrill Lynch — Analyst
Okay. Sure. Under re-leasing spreads, I just want to extend the question that you had earlier on G2 that even N1 did show a minor dip in the quarter. I think minus 2 or minus 3. Again is that a case of re-leasing within anchor tenant or something else?
Alok Aggarwal — Chief Executive Officer
No, not really. Yes, N1 did — see N1 what happens, there certain new tenants were there, areas are small. We thought let them just get in. And of course they will take more space and that’s the time we can always get better rentals. So minus 1%, minus 2% can happen actually, that’s something is fine. Overall, we are very confident we’ll be able to surpass, you know, kind of actual numbers by wide margin in one. That’s something we are very confident. And that you should see very soon.
Kunal Tayal — Bank of America Merrill Lynch — Analyst
Got that. Okay. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Sameer Baisiwala — Morgan Stanley — Analyst
Thank you very much and a very good afternoon to everyone. I’m on Slide number 7, and looking at the NOI growth bridge that you’ve given. So just two questions on this. So what’s the rough timelines that you are looking at in achieving this? And second is what kind of occupancy is assumed over here?
Alok Aggarwal — Chief Executive Officer
So see what — I think we have said that earlier also, we expect by sometime towards end of next year we should be able to achieve this. And of course you know to achieve this, we need occupancies in high 90s, we have to definitely cross 95%. And that definitely we are confident of achieving those occupancies because these assets have seen occupancies to the 100% level, whether it was N2 or G2 or even K1. So we are confident that we should be able to reach or inch towards 100%. But to achieve these numbers, we’ll definitely need, you know, the occupancies have to cross 95%.
Sanjeev Kumar Sharma — Chief Financial Officer
And Sameer, if I may add, with the reforms that are happening in the entire SEZ regime, one thing is, our assets are designed for a 100% occupancy, so there is no structural vacancy in our properties. And with the opening up of the space altogether, I would say that these numbers are both in terms of re-leasing spreads that we hope to achieve, as well as time to get to the high 90s, looks lot more favorable in addition to the fact that back to work regime is firmly in place now.
Sameer Baisiwala — Morgan Stanley — Analyst
Yeah. Thank you very much. Very helpful. And just on the timeline, so Alok, when you say, end of next year, I mean, that would be the first quarter exit rate. Is that what’s implied or [Speech Overlap]
Alok Aggarwal — Chief Executive Officer
I am saying towards ’23 end. Towards ’23 end actually.
Sameer Baisiwala — Morgan Stanley — Analyst
’23, that’s current year.
Alok Aggarwal — Chief Executive Officer
No, no, no, I am saying, calendar ’23 end. So I would say 18 months from now.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. Got it. Very clear.
Alok Aggarwal — Chief Executive Officer
Yeah. Around that.
Sanjeev Kumar Sharma — Chief Financial Officer
I mean, this is an exit run rate. Like he said, this is a run rate number, INR1,100 crores.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay, okay. Fair enough, yeah. And the second is, if I am not wrong, the G1 ROFO validity is still August ’22, you know. I think that’s what the slide mentions. And we are right there. So should we expect the conclusion of the deal this month or can this be extended?
Ankur Gupta — Managing Partner
So, this is Ankur, Sameer. So, look, as the stats on Slide 8 show that the occupancy of this asset is at 77%. So we have — this needs to move up or there needs to be a structure around it. So it’s actively, you know, it was actively under discussion. We are not going to have a resolution of occupancy in the short-term. But the Board did deliberate upon it. And at this time, at least there is no reason for us to exercise the call option on this asset with these occupancy numbers. But we are evaluating it still, if there is anything that we can structure around it. So more to come on this space in future.
But, yes, this asset remains part of the book in Sponsor Group, and will remain available should the REITs be — should the physical occupancy numbers in terms of leasing numbers improve going forward.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. So which means even if it spills beyond August ’22, the asset would be — will remain available to us.
Ankur Gupta — Managing Partner
Asset would remain the Brookfield Sponsor Group at this point.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. Okay, that’s fine. And the other question I want to check is, in your micro-markets, do you see much of GCC demand. And would you make a distinction between what GCCs offer versus large IT companies offer?
Alok Aggarwal — Chief Executive Officer
So we have a, you know, if you really see we have a kind of a mix of demand. But for really GCC to come, when GCCs are putting their buildings, they typically would say, build-to-suit development actually. They would plan for a full building, dedicated building, build-to-suit development. So that’s where we stand.
Ankur Gupta — Managing Partner
That Samsung for example.
Alok Aggarwal — Chief Executive Officer
Yeah, so, yes, [Indecipherable] Samsung is something, when they saw the building, it’s a new building which got constructed, they saw the building, they said, we want to be in this building, they’re occupying more than 50% building. But yes, GCC demand, so right now it’s a mix.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. But you remain much more skewed towards IT services for your micro-markets, yeah.
Ankur Gupta — Managing Partner
Sameer, if you look at the trends, it’s actually a mix. We have for example in assets like N1, we have Barclays and we have Amazon. We signed leases with Legato, Samsung. We also have a large presence of TCS as well as Accenture. I would say, the mix has been healthy right now because you also don’t want to be overweight one particular aspect. IT companies today has been — are sitting on a huge bench of people that they’ve hired, but have not probably found an office just yet. So I would say, the growth might come a lot from IT companies as well going into the future.
GCCs are always clumsy, they always take a large space, and it takes time to develop solutions for them. So I would say, underlying business, whether it’s done through an IT company or GCC largely remains the same. GCCs has come in a big way over the last few years, they continue to be solid in across our portfolio in the non-REIT assets. But IT companies have also moved up the value chain. And many IT companies do very dedicated work for large tenants operating out of our spaces. So actually tough to really see through always, whether it’s what type of business is happening.
Alok Aggarwal — Chief Executive Officer
But let me just — Ankur, if that’s okay, let me just give you the break up of the last quarter. I think that will give some insight. We have almost 25% of the engineering companies, then we have consulting, again in the 25%, we have e-commerce, we have healthcare, healthcare is big actually. And the IT or the tech companies which you’re talking about was only just about 10%. But of course this mix can change. That’s why I’m saying, I’m not really getting through — I am saying it’s a mix. Even last quarter, we have logistic, we have engineering, last quarter we are talking about, I mean, last to last quarter, again it was logistic, it was insurance, it was healthcare. So that’s where we stand. I mean, it’s not predominantly tech. Tech is of course large part, but it’s not that it’s predominantly tech.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay, great. Thank you.
Operator
Thank you. [Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Ankur Gupta for his closing comments.
Ankur Gupta — Managing Partner
Thank you very much everybody for your participation. And we look forward to furthering our interactions in the next quarter. Thank you very much. Have a great day and a pleasant week ahead.
Operator
[Operator Closing Remarks]