Mindspace Business Parks REIT Analyzed

Nuvama Institutional Equities is optimistic about Mindspace Business Parks REIT after it bought three important buildings in central business districts (CBDs) for a total of approximately 0.8 million square feet. Two of these buildings are in Mumbai and one is in Pune, all purchased from the REIT’s own owner, K Raheja Corp, for a value of ₹2,920 crore. This deal is seen as a good thing for investors.

Key Points

• Nuvama recommends “Buy” rating for MREIT.
• Target price set at ₹507 (by FY28E).
• Expected 12% DPU CAGR from FY25-28E.
• Acquisition boosts portfolio to 39 msf.
• NOI increases by 9% & DPU by 1.7%.
• Leverage stable with LTV at 24.7%.

The analysts, Parvez Qazi and Vasudev Ganatra, believe this purchase will make MREIT’s buildings even more valuable. They are targeting a price of ₹507 per unit, based on calculations that predict the REIT’s value will grow over time.

The buildings being bought are all already operating and making money. Experts also think they could become worth more over time – a situation called “mark-to-market” upside. The deal is expected to be finished by January 26th.

One of the buildings, Ascent in Worli, Mumbai, is in a prime location and currently only 6% of the space is empty. Rents in this area have been rising – up about 7% since 2019. The company expects most of the remaining space to be rented out quickly.

Another building, The Square Avenue 98 in BKC, Mumbai, is also popular with tenants. It’s currently leased to WeWork and offers the potential to expand by 62,000 square feet. This means even more space for businesses.

The Pune building, leased to WeWork, has a long-term lease agreement (WALE) of 6.8 years. This means the rent won’t change much for a while, providing stability.

Overall, the analysts predict that the acquisition will increase the REIT’s income by ₹2.3 billion (₹230 crore) and expand its total value by 7.6%. Importantly, they say the REIT will remain financially stable, with a manageable level of debt.

“The acquisition is expected to drive 9 per cent NOI growth and 1.7 per cent DPU accretion, increasing the contribution of the front-office portfolio to 7.9 per cent,” the analysts said.

Investing in real estate is about building a future where your money continues to grow.