Brookfield India Real Estate Trust REIT (NSE: BIRET) Q3 2025 Earnings Call dated Jan. 31, 2025
Corporate Participants:
Alok Aggarwal — Chief Executive Officer and Managing Director
Ankit Gupta — President
Amit Jain — Chief Financial Officer
Analysts:
Puneet Gulati — Analyst
Jatin Sanghvi — Analyst
Pritesh Sheth — Analyst
Parvez Qazi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Brookfield India Real Estate Trust Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode until the floor is opened for questions. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. We have with us on the call today, Mr Alok Agarwal, CEO and MD; Mr Ankit Gupta, President and Mr Amit Jain, CFO of Brook Prop Management Services Private Limited; Mr Rajit Kothari; and Mr Sabnani from Brookfield. I now hand the conference over to the management team. Thank you, and over to you, sir.
Alok Aggarwal — Chief Executive Officer and Managing Director
Good afternoon, everyone. This is Alok. On behalf of the India Real Estate Trust, I extend a warm welcome to all participants joining us today for this conference call. Let me start by giving an update on office markets in India. The India office market witnessed exceptional momentum in leasing activity in year 2024, cementing India’s reputation at the office of the world. Across the top eight cities, gross leasing activity is hit an all-time high of 89 million square feet for calendar year and therefore is a robust demand for high-quality office spaces. We believe that demand for grade A office spaces will remain strong in 2025 as well. This optimism is driven by sustained revenue growth among IT companies and growth of GCCs in India. Notably, GCCs accounted for over 3% of total space take-up in 2024 with both new entrants setting up global hubs and existing firms scaling up their operations.
With a rising focus on AI, emerging technologies, engineering and R&D, headcounts across organizations are expected to grow further and this growth combined with the continued tend augurs well for high space adoption in year 2025 as well. Turning to, I’m delighted to report another outstanding year of growth and a fantastic last quarter. For the second consecutive quarter, we achieved 1 million square feet of gross leasing, reflecting strong demand for our premium A office assets and office campuses.
Our committed occupancy has increased by approximately 770 basis-points over the past 12 months, crossing 87% occupancy. Importantly, we have already achieved the lower-end of our stated occupancy guidance for financial year 2025, three months ahead of schedule. With robust market demand, we are confident of further improving occupancy levels in financial year 2025. Additionally, we successfully completed INR35 billion to IP fundraise this quarter, which was oversubscribed by 1.5 times. This resounding support from institutional investors reaffirms their confidence in our high-quality portfolio and strengthens our ability to pursue strategic growth opportunities.
Looking ahead, we expect leasing momentum — leasing momentum to remain strong in 2025 with a drilled offering of SEG and non-SEG spaces across our campuses, we are well-positioned to attack a diverse tenant base and our journey towards higher occupancy. Let me now invite Ankit to take you through details on key highlights for the quarter.
Ankit Gupta — President
Thank you, Alok. Good evening, everyone. As Alok mentioned, we successfully closed INR35 billion QIP in the previous quarter and the QIP issue saw strong demand from marquee long-term investors like IFC, LIC, SBI Mutual Fund, Mutual Fund amongst others. In fact, this is the first-ever equity investment by both IFC and LIC in any REIT in India. The commitment by these reputed long-term institutional investors is a testament of our high-quality portfolio and positive business outlook.
As a result of the QIP, our LTV has gone down from 35% approximately to now approx 25%, which gives us enough headroom to pursue strategic inorganic growth opportunities for the REIT. We are in conversations with our sponsor group to evaluate acquisition opportunities in Bangalore spanning 9.5 million square feet of assets. We continue to deliver on our stated leasing guidance and we have registered the fourth consecutive quarter of upward movement in occupancy crossing 87%.
This quarter, we delivered 1.1 million square feet of gross leasing, marking the second consecutive quarter of exceeding 1 million square feet-in gross leasing. Some of the key large wins for us this quarter are Gemini of 2,40,000 square feet, selling performance of 1,25,000 square feet and general mills of around 77,000 square feet, amongst others. Interestingly, all these tenants have expanded their footprints in the rate portfolio. Capgemini and Teleperformance growing their footprint by around 70% each to 580,000 and 3 lakh 6,000 square feet, respectively, and General Mills increasing their space by 53% to 2,20,000 square feet.
And this speaks volumes about the stickiness of these large tenants in our high-quality assets. There is strong demand revival in our SEZ portfolio with occupancy growing from 76% to 83%, a 700 points increase in the past 12 months. The conversion of SEZ spaces to NPA has further boosted the leasing in these properties. We have achieved a gross leasing of around 2 million square feet-in the past 12 months in our SEZ properties, of which about 40%, which is 0.8 million square feet has been in the NPA space.
This quarter, we converted an additional 0.7 million square feet of space to NPA, which is 0.5 million square feet-in G1 and 0.2 million square feet-in N2 with a robust leasing pipeline and 3.7 million square feet across our SEZ properties, we are confident of continued occupancy growth in our SEZ properties in 2025. With sequential occupancy improvement in the last four quarters, we have seen an increase in the same-store NOI growth by 17% over the last 12 months.
This was also supported by the contractual escalations as well as the spreads achieved on re-leasing and renewals. We achieved an average 8% escalation on 1.6 million square feet during the — during the quarter and 17% ring leasing spread. On the ESG front, we continue to make significant strides towards our net zero carbon goals by 2040 or sooner. Currently, 40% of our total energy requirement at our Delhi NCR campuses is sourced from renewable energy and we are on-track to achieve 100% green power across all campuses by 2027 in recognition of our efforts, we received the Golden Peacock Award for ESG in 2024 and five of our assets, G1, G2, N1, N2 and K1 earned five-star ratings and the of from the British Safety Council.
Now I would like to invite Amit to provide the financial updates.
Amit Jain — Chief Financial Officer
Thank you,, and good afternoon, everyone. Our operating and have grown to INR443 crore in Q3 FY 2025, 4% higher Q-on-Q compared to INR426 crore in the previous quarter and 13% higher Y-o-Y compared to INR393 crore in the same-period last year. The adjusted NOI for Q3 FY ’25 is at INR504 crore, 4% higher Q-on-Q compared to INR486 crore in the previous quarter and 11% higher Y-o-Y compared to INR453 crore in the same-period last year.
The Y-o-Y growth is primarily on account of new leasing, renewals and contractual escalations. We are distributing INR4.9 per unit this quarter, translating to a total distribution of INR298 crore. For nine months in FY 2025, the total DPU number is at INR14. In the short-term, the proceeds that we raised through QIP would be utilized towards reducing debt in the portfolio as stated in use of proceeds of QIP, thereby creating LTV headroom, which can be utilized for strategic inorganic growth.
Reduction in debt in the short-term would increase the total distribution to unit holders on an absolute basis due to reduced interest burden on the debt. Based on — based on our current run-rate of NOI on an annualized basis, we would have total NOI of approximately INR1,800 crore. This takes into account 50% NOI from assets where we have 50% economic interest. Steady leasing recovery can drive approximately 16% growth in our NOI run-rate.
This coupled with reduction in the interest burden due to debt repayment from QIP proceeds should lead to approx 25% growth in distributions. This would translate to a distribution per unit on a stabilized basis of INR24.7 without accounting for any impact on account of rent growth, contract escalations, MTM and changes in the interest rates. We continue to maintain a dual AAA rating from and Crisid on the back of our strong balance sheet, a long-dated maturity profile and limited amortizations over the next few years. A majority of our loans are linked to the repo rate, which will benefit us as the benchmark rates begin to trend lower.
With that, I would request the moderator to open the floor for Q&A.
Questions and Answers:
Operator
Thank you much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles to ask questions please press star and one the first question is from Puneet from HSBC. Please go-ahead?
Puneet Gulati
Yeah. Thank you so much and congratulations on good progress on occupancies. My first question is if you can talk a bit about the NOI margin. We’ve seen a bit of improvement on the Q-on-Q side, year-on-year side. What’s driving this and how far do you expect this to go from current levels?
Amit Jain
Margins. So margins are basically that obviously the occupancy has contributed the growth of NOI margins. In the last nine months, the occupancy levels have increased by around 7.7%. And the contractual escalations is other factor as well as the MTN, the spread in re-leasing is contributing towards the growth in NOI margins?
Puneet Gulati
And should one think of these 107% type of LRD peak levels or is there more room within the assets to deliver?
Amit Jain
Sorry, I didn’t get you right., can you read about 10% to
Puneet Gulati
70% of lease rentals is where you’re currently trending at your portfolio. Is there more room to grow from these levels or they should consider this has peak level of margins?
Amit Jain
I would say this would remain at the same level broadly so yeah, that would be the answer to your.
Alok Aggarwal
Yeah, but just — I mean, I gave you, but there is a bit of scope for upside. As you know, a lot of people would come back to offices, there is a possibility that some of the tenants may keep move from 12 by 6 to 24 by 24.7% and then our margins could improve. I think historically, Amit, we should check we used to have slightly more 9 to 119. So that’s a possibility. But right now, we stayed at what Amit is saying, but there is an upside possible. That’s the what I want to make.
Puneet Gulati
Understood. Secondly, there seems to be improvement in the dividend from the North commercial portfolio. What’s driving this? And is that the new consistent level?
Amit Jain
For this quarter, we have received a certain income tax refunds in the North Commercial portfolio that is contributing to a higher dividend. So tax refunds are lumpy in nature. You can’t predict which quarter we’ll get these defunds as such. So for this quarter, that was the reason for increase in dividends from our commercial portfolio.
Ankit Gupta
However, having said that, Puneet, while this quarter it has been this reason and maybe next quarter that will go down. But in — like we had mentioned in one of our earlier quarters, over the end-of-the next year, we see the overall dividend component approaching to 20% of the overall share in a steady-state anyway. So that we will see as an improvement.
Puneet Gulati
Okay. And lastly on the — the DPU walkdown, would it be fair to say that some bit of equity raise bit of adjustment, et-cetera has also been used to pay-out DPU or everything is coming from operational, if you can elaborate a bit on the part.
Alok Aggarwal
Nothing — so nothing from capital raised has definitely been used for the DPU purposes. Obviously, our — once we utilize the QIP funds to repay debt, the interest savings will, you know, contribute to the DPU, but no proceeds of QIP has been distributed back to the investors.
Puneet Gulati
Because when I look at the gap from cash-flow from operations to the gap between the NDCF REIT, it’s about INR40 crores more. So some bit in fact, interest etc would have gone up, capex has gone up, but you can fund capex by debt. Then where-is the balance coming from?
Amit Jain
You know, it’s primarily a tax refunds of what — as we said earlier, that is that is a lumpy part in the current quarter that is contributing to.
Ankit Gupta
So Puneet, if I may add, the NDCF generation this quarter is in the — on an undiluted basis is 480, 490 and Amit can probably add the exact number there per unit. Add-on to that the tax refunds that have come in the December quarter. Also add-on to that the impact of the expanded capital base. That basically gets to the 496 that we have generated and 4.9 that we have distributed, and that’s the way to probably read it. Incrementally, in the next quarter, we will have till such time as, let’s say, we do the next acquisition, the tax — the interest savings will further contribute as we keep progress and replace some of what we’ve seen in the last quarter.
Puneet Gulati
So what I’m trying to understand is if I look at broadly, you know on cash-flow from operations basis, you’ve got INR30 crores more and extra dividend is about INR14 crores. So that’s of this INR70 crores of the addition you’re saying. That’s how it has come
Amit Jain
No, so Puneer, I’ll just break it down for you, right? If you just look at the NDCF SPV level 9, it generated about INR11 crores more just at the NDCF level, right, without north commercial portfolio, North Commercial portfolio has generated about INR45 crores more than the last quarter because of to funds. So that’s 10 plus 45, that’s INR55. And if you see the line the cash retained at SPV level, last quarter we retained about INR16 crores at the SPV level that did not get reported in our NDCF. This quarter we have not retained that much. We’ve only retained INR3 crores. So add another INR13 on it. So you are 11 plus 45 plus 13, that’s your bridge to INR70 crores.
Puneet Gulati
Understood. That’s helpful. Thank you so much.
Operator
Thank you. Next question is from Jatin from Bank of America. Please go-ahead.
Jatin Sanghvi
Hi, thanks for the opportunity.
Operator
Jatin, we can barely hear you. If you could maybe speak a little louder or closer to the
Jatin Sanghvi
Hello. Can you hear me now?
Operator
Yes. Much better. Please go-ahead.
Jatin Sanghvi
Yeah. Thanks for the opportunity. So just to your point on the Bengaluru opportunity, what’s the plan here? Are we looking at acquisition or is there a plan to sort of go for the acquisition all at-once? So that’s number-one. And second, you’ve been sort of very consistent on your inorganic additions. So beyond this Bengaluru portfolio, are there any other opportunities that you’re evaluating maybe outside the sponsor portfolio.
Ankit Gupta
Yeah, this is look, I think our sponsor group owns a large portfolio a large part of it, which doesn’t sit in the REIT today is focused on Chennai, Bangalore and Pune. Bangalore continues to be of high-interest to the REIT given it’s highly complementary and a very attractive market to begin with. So that’s a focus for us. The sponsor group owns about 10 million square feet of assets or 11 million square feet of assets where there is a conversation today to figure out depending on the amount of capital that the REIT has and can raise in future, what is the right deal that could be done in a short period of time.
So we continue to have those conversations. It may take us a couple of rounds to get the entire portfolio. But at this point in time, the good news is we have about INR3,500 crores and we can put it to work very quickly. So based on that size, we are having a conversation on a 50% stake in a large portfolio.
Jatin Sanghvi
Understood. Got it. Good. Thanks so much. That’s all from me.
Operator
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Pritesh Sheth from Axis Capital. Please go-ahead.
Pritesh Sheth
Yeah. Hi, thanks for the opportunity and congrats on very strong progress in terms of occupancy. First is on, again, the occupancy guidance, you already mentioned that we have achieved the low-end of the guidance, but next quarter, there is similar expiries coming up, which we had this quarter as well, do you think you are little bit conservative in terms of guidance and then there is significant upside on the occupancy number that we want to achieve in by end of FY ’25?
Ankit Gupta
So there Pritesh, I would say that we have already achieved our lower-end of the guidance. For this quarter, we continue to put our heads around and focus on delivery. We maintain — for now, we maintain our occupancy guidance that we have. And obviously , if things go very well, we will try and over-deliver on it, but right now we continue to maintain the occupancy guidance of 87% to 8%, 9%
Pritesh Sheth
Sure just to get a sense on you know-how next two years would look like in terms of occupancy. I think key pillars of further occupancy growth would be our SEZ assets in Gurgaon and Noida, right? So we have applied for further conversions, you have mentioned about strong leasing pipeline in Slide 16 how should one look at these three assets, specifically in terms of occupancy ramp-up, this pipeline that you have mentioned should get converted in probably next couple of quarters, how is the visibility like
Alok Aggarwal
This is a. I think a good observation has kind of a similar three assets where we have to — we have to really ramp-up. If you see most of other assets are 90% plus and we have always maintained that our assets will, you know, will cost 95% and move towards 90% to 90%. That’s a strong belief that we have operated with them for many years. So if you look at — if you look at G2, N2 and due to largely CGSS, I think our occupancy level, including is about 83%. So bulk of new leasing probably come from G2, N2 and G1.
Now in N2 and G1, we already have areas which are divertified and in G1, we already have achieved about 200,000 square feet of denotified leasing along with the SEG leasing which is moving in parallel. Now into pipeline is very, very strong and we can have conversions any day. The G2 also, G2 probably as we have always maintained in last quarter also probably would last to follow the reasons for that even the conversion is — conversion will happen. But yes, our — in all these three assets, we expect over a period of time, I’m not spending the time overall possibility to cross 90% and then move towards 95%.
Pritesh Sheth
So yeah, sorry, you quite.
Alok Aggarwal
I’m saying does it answer your question or any more issue?
Pritesh Sheth
No, absolutely. I think it’s — it answer my question. Yeah, I think that’s it from my side and all the best.
Alok Aggarwal
Thank you
Operator
Thank you. Participants who wish to ask questions, please press star and one on your touchtone telephone. Ladies and gentlemen, to ask questions you may press star and 1. The next question is from Khashi from Nuvama Group. Please go-ahead.
Parvez Qazi
Hi, good afternoon and thanks for taking my question. We have seen steady improvement in occupancy across most assets, probably except G2. Now you had mentioned earlier that G2 will probably be the last one to see it still up. But in general, across the three large SEZ properties that we have, which is E2 and where currently occupancies are, let’s say, somewhere around 75% to 80 odd percently what is your estimate by when, let’s say, can we reach 90% across these three assets? Will it be, let’s say, by end of FY ’26 or do you think it will take longer?
Alok Aggarwal
Okay. Okay. So this is a low. Now if you see G1 today we are at 79% and I think maybe two quarters back, we were at — we were at probably around 70%. So we have seen a strong almost percentage almost 9% to 10% going up in last two quarters. So I’m taking asset by even momentum is very strong, we are seeing SEG as well as non SEG leases picking-up and some of the leases what we’ve done in this quarter in SEG space as well as non-SE space.
So, I think we’ll see a very, very rapid growth in occupancy. I think I will — let’s hold-on for next quarter to say when it will become 90%, but there is quite a good chance that by end of next 12 to 15 months, we could be at-will cost 90%. So that’s on G1. And N2 again very strong leasing momentum both from — both from SEG as well as non-SEG tenants. And again here even N2 also — I mean, we should see occupancy crossing 90% a short-time, I think this year itself actually, assuming there are no kind of expiries or any kind of a cylinder, but that we are anticipating.
So N2. Now due to why we have said taking — take little time because they are large tenants, they are large RFPs actually. And those we are working on, larger RFPs take a little more time actually. That is one reason why Q2 probably will follow last one to get kind of — that’s how it has been planned and that’s how it has been thought about it. So G2 will take some more time. But I’m not committing a number right now, but we have large RFPs. We can — if one of them get converted, we can see good improvement in G2 as well. But end-to-end G1 are very, very eminent in next few quarters?
Parvez Qazi
Sure. My second question is regarding future ACV conversion. I mean, what is the pipeline there? And specifically with regards to G2, what do you think will drive the increase in occupancy? There will — it be the conversion of SEC into non-SEV space or will we need an improvement in leasing in the SEV area to improve the overall occupancy there? Thank you.
Alok Aggarwal
Yeah. So good question. But you know, if you’ve seen our leasing numbers, we have been able to kind of leverage on SEG tenants as well. Our existing tenants have taken a lot of. We have attracted — we have attracted new tenants to SEG spaces because still SEGs do offer a value in terms of — value in terms of taxes, while it’s not direct taxes, but in terms of India taxes, they still do offer a value. So we continue to kind of let our tenants grow and keep attracting new tenants in SED.
In non-SEG also, we have seen many, many new tenants coming and taking space across our campuses. So in Q2 also, we again see a combination of SEG as well as non-SEG. And when it non-SEG will be largely, largely new, but of the existing — of the existing tenants also probably will — we probably can bring their non-CG portfolio into G2, but we’ll see — in SEG, it could be new as well as old. So it’s a combination of all three SEG tenants, two non-SE tenants and existing SEG tenants getting their non-SEA portfolios like in, Cap Germany, they have SEG presence, they have non-SEG presence and that could get repeated in all across our campuses. So that is where our.
Ankit Gupta
But I would just add that now in the current market, we are uniquely and favorably positioned as having supply in an asset of both SEZ and non-SEZ products, which is fairly unique. And like Alok mentioned, the kind of strong demand we are seeing from both SEZ and non-SEZ is helping us get the kind of growth we are referring to, right? I mean, for example, G1, we have now already denotified about 0.5 million square feet and of that 0.5 million square feet, 200,000 square feet is leased-up, while also the SEZ area which we did not notify continues to get taken-up by the SEZ tenants. This is just one example., we denotified 6 lakh square feet, it’s already leased-up and so on. So that dual product story is playing out in our favor.
Parvez Qazi
Sure. Thank you.
Operator
Thank you. Participants who wish to ask questions, please press star and one on your touchstone telephone. Ladies and gentlemen to ask questions you may press star and 1 well, as there are no further questions, I would now like to hand the conference back to the management team for closing comments
Alok Aggarwal
I’m assuming there are no further questions. Thank you everyone for joining today’s call. We look-forward to connecting with you all next quarter. Thank you.
Operator
Thank you very much. On behalf of Brookfield India Real Estate Trust, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines