Brookfield India Real Estate Trust (BIRET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the First Quarter of FY 2027 Earnings Call for Brookfield India Real Estate Trust. Brookfield India Real Estate Trust released its financial results for the quarter ended June 3, 2026. Brookfield India Real Estate Trust has placed the financial results, earnings presentation and the investor section on the website at www.brookfieldndiareit.in. Please note that the management may make certain remarks during this call -- during this conference call, that could be considered forward-looking statements. Actual result may differ from the statement and Brookfield India Real Estate Trust does not guarantee such outcome nor undertake any obligation to update them. Any financial guidance or pro forma information shared today represents management's estimate based on specific assumptions and has not been audited, reviewed or independently verified. We caution you against placing undue reliance on this information as there can be no assurance or achieving the results discussed. [Operator Instructions] On the call, we have the following question. Mr. Ankur Gupta, Non-Executive Director; Mr. Shashank Jain, CEO and Management Director; Mr. Rachit Kothari, Non-Executive Director; Mr. Saket Gupta, Head of Finance of Brookprop Management Services Private Limited; and Mr. Shailendra Sabhnani from Brookfield. I now hand the conference over to the management for the opening remarks. Thank you, and over to you, team.

Thank you. Good morning, everyone. This is Shashank Jain here. A very warm welcome to Brookfield India Real Estate Trust Quarter 1 for Fiscal '27 Earnings Call. Thank you to all our unitholders, analysts and participants for joining us today for this call. Let me begin with a brief update on the macroeconomic and office market environment. India's economy continues to demonstrate resilience despite a volatile global backdrop. India's deep talent pool, competitive cost, digital ecosystem and policy stability continues to enforce its position as a preferred destination for multinational companies and global capability centers. The India office market has carried its strong momentum into 2026. Industry data indicates that office absorption has reached a record 45-plus million square feet in the first half of calendar '26, which is an increase of approximately 10% year-on-year. GCC is accounted for roughly around 20 million square feet, which is roughly about 43% of total leasing. Green-certified buildings accounted for almost 73% of the leasing activity during the quarter, implying that the demand is increasingly focused on high-quality, sustainable and institutionally managed campuses. This market backdrop is actually directly aligned with the positioning of Brookfield India REIT. As of June 30, 2026. Our portfolio comprises 32.6 million square feet across key gateway cities, with a committed occupancy of around 93% in place rent of INR 104 per square feet per month and a long-dated wheel of 6.7 years. Our pan-India presence, high-quality tenant roster, focus on sustainability and concentration in established office micro market positions us well to capture continued demand from GCC and other global occupiers. Let me now take you through our leasing and occupancy performance for the quarter. During the first quarter of fiscal '27, we completed 1.1 million square feet of gross leasing, comprising roughly about 700,000 square feet of new leasing and almost 400,000 square feet of renewals. The average rent on gross leasing was INR 100 per square feet per month, and the weighted average lease term was 9.8 years. The re-leasing spread achieved was about 14%. Leasing demand remained broad-based across product categories, spanning SEZ processing area and nonprocessing area and IT and commercial spaces. GCC occupiers for us accounted for almost 39% of gross leasing during the quarter, supported by expansion demand from existing tenants such as Honeywell and KPMG Global Services. Tech services tenants also demonstrated strong commitment to our portfolio, contributing 63% of our quarterly renewals with an healthy renewable tenure of approximately 11 years. Despite more than 1 million square feet of expiries during the quarter, we maintained portfolio committed occupancy of 93%, which is 4 percentage points higher year-on-year. We continue to proactively address few expiries. During the quarter, we secured an early renewal of approximately 565,000 square feet with Bharti Airtel at the Center, representing around 80% of campuses gross leasable area. The renewal was completed approximately 2 years ahead of expiry for a 9-year lease term and a 5-year lock-in on majority of the renewed area. Including the commitment secured previously, we now have derisked approximately 1.3 million square feet of our future [indiscernible] across the remaining 9 months of fiscal '27 as well as full year fiscal '28. This proactive approach provides greater cash flow visibility, reinforces the strength of our tenant relationships and also reflects the tenant stickiness in the portfolio. Our expiry profile also remains well staggered, with only 8% of gross rentals due for expiry during the remaining 9 months of financial year '27 and approximately 33% cumulatively through up to financial year '30. Let me also then talk about the acquisition that we announced. During the quarter, we signed a binding agreement to acquire 264,000 square feet front office property, comprising 3 contiguous floors in Godrej BKC, a landmark grade A building located in the central business district of Mumbai. The proposed acquisition is being undertaken in a 50-50 partnership with NCW prime offices on a part of Nuvama Group. The asset is leased to front-office blue-chip tenants with high occupancy and an almost 6.9 years [indiscernible] and 82% of lease area under lock-in. The acquisition price is INR 1,700 crores on a 100% basis, implying a 4% discount to GAV and a cap rate of 7.4% basis FY '28 estimates and almost 8.1% cap rate basis FY '30 estimates. Now in terms of our further growth opportunity, we have a robust sponsor group pipeline, a couple of high-quality assets approaching stabilization in the sponsor group portfolio are Waterstone campus, a 9-acre mixed-use campus in Mumbai's airport business district. It has 1.4 million square feet GLA of office space. 48 ultra-premium service residences and a 3-acre exclusive members-only club. The second one is in Pune, Bluegrass Business Park at 2 million square feet in Pune with Tower 1, which is fully leased and Tower 2, which is under construction and 50% pre-leased. In addition to inorganic opportunity, the portfolio has meaningfully embedded organic growth potential of approximately 15%, which excludes contracted rent road and mark-to-market gains. Moving on, on our focus on ESG and sustainability. Sustainability remains deeply embedded in our operating philosophy, very pleased to share that during quarter Walmart New Delhi achieved the IGBC Green existing building platinum rating. Our campuses at N1 and N2 received edge advanced certification and Walmart Gurgaon and Pavilion Mark received edge certification from International Finance Corporation. With that, I'll hand it over to Saket to take you through the financial performance for the quarter. Saket?

Thank you, Shashan, and good morning, everyone. Let me now take you through the financial highlights for Q1 '27. Operating lease rentals for the quarter was INR 7.14 billion, representing growth of 56% year-on-year, supported by contribution from [indiscernible] and same-store growth across the portfolio. Net operating income was INR 7.57 billion, reflecting growth of 51.7% year-on-year. Same-store NOI increased by approximately 8%, driven primarily by fees of vacant area, mark-to-market gains and contractual rent escalations. For Q1 FY '27, we declared a distribution of 5.6%. Total distribution for the quarter stood INR 4.6 billion. Our balance fee remains robust and well positioned to support future growth in a disciplined manner. As of June 30 '26, our LTV, excluding shareholder estimates, stood at 25.9%. On a performer basis after the proposed [indiscernible] in BKC, we have a dry order of approximately INR 43 billion, and a 35% LTV threshold to support future growth opportunities. We continue to maintain [indiscernible] AAA stable credit rating from CRISIL and ICRA. Our average interest rate remained at 7.3%, supported by a long dated debt faculty profile and limited long term amortization. With that, I would now request the moderator to open the floor for questions.

[Operator Instructions] First question comes from the line of Karan Khanna with Ambit Capital.

My first question to you, Shashank, give us to your first earnings call, I can see you're taking over a platform that has built significant scale, strong occupancy and a sizable development and acquisition pipeline. Giving a background across real estate, private equity and M&A, what are the 2 or 3 strategic priorities you want to put your [indiscernible] over the next 12 to 14 months. And in particular, do you see the next phase of BIRET's growth being driven more by organic portfolio optimization and development or by accelerating acquisitions and expanding the platform.

Thank you Karan, and thank you for asking this question. It's a privilege and honor for me to be taking over this position, a platform that we are also proud of for institutionally managed -- 100% institutionally managed platform. I think we are at a point of time which we are well poised for growth, and we have opportunities virtually across the portfolio. As I mentioned, we have a very robust response to pipeline that we would continue to look for and participate in the process as and when that comes up. We would also be open for looking at acquisitions outside the sponsor portfolio as and when there is an opportunity, we'll continue to remain a disciplined investor. As far as the existing portfolio is concerned, you're right, we are looking at optimizing our portfolio, both in terms of our tenants profiles, occupancy as well as any potential development opportunities within the within the portfolio that we have. So all in all, yes, we would be looking at a portfolio of growth from various potential available opportunities, both organically and inorganically.

Sure. And then secondly, Shashank, if you look at GCCs, that remain a major structural driver for the office market but we accounted for 39% of Q1 leasing versus roughly 50% in Q4 and FY '26, while technology services accounted for 63% of the Q1 renewals. So from your conversation with occupiers, are you seeing the next leg of demand broadening meaningfully beyond traditional, technology and GCC users? And looking 3 to 5 years out, how are you thinking about AI-driven productivity gains affecting the quantum of office space companies ultimately need?

Yes. Good question, Karan. Thank you. So bases are conversations with our tenant partners and broader ecosystem in the industry, I think there are 2, 3 elements that's coming in. One, we continue to see influx and robust demand from GCC is coming in. Now there could be a few basis points here and there on a quarter-on-quarter basis. But the long-term story of India being a very attractive talent pool and hence attracting a lot of multinationals to set up. Their Capability centers remain intact, and we do want to continue to partner with them in their growth journey. That's one. As far as the broader tech services is concerned, as we mentioned, over 60% of renewables -- I mean, the tech services continue with their renewal. Bases our conversation, there are a couple of things, one, in the near to short term or midterm, we do not see AI impacting our clients or tenants decisions and occupancy as such. Like any other technology evolution, we expect all the companies to evolve themselves. And, in fact, use India as the AI talent hub increasingly. With that backdrop, we don't really see in the short to medium term, any immediate impact or significant impact of AI disrupting our growth plans or growth plans of our tenants in a material way.

Sure. And then lastly, on the BKC acquisition, the roughly direct share at 58% is about INR 8.5 billion. So what is the expected DPU accretion for BIRET owing to the acquisition of the 3 floors at Godrej BKC?

For the GBKC acquisition, our assessment is it's going to be a DPU-accretive acquisition. The DPU yield is expected to be about 7.1%, which is healthier than that at our portfolio level. So going forward in the, let's say, next 12 months or next full year, as we said, we see this to be an overall DPU-accretive transaction or acquisition for us.

Next question comes from the line of Pritesh Sheth with Axis Capital.

A few questions from my side. Firstly, on the cash balance that we have, I know some of this could be utilized to for the BKC acquisition. But how are we going to utilize the balance? Any plans for debt repayment? Or you would still hold on to it considering that there are a couple of sponsor acquisition opportunities which are coming due. So what's your strategy on that?

So we will continue to evaluate the optimal use of cash that we have and it's going to be a combination of any potential short-term strategy of debt repayment across various assets that we are in the process of evaluating. And also at the same time, as and when we get clarity on the time line that the sponsors would look at in terms of integrating -- so we'll sort of balance out the utilization of cash based on these 2 strategies.

Sure. So like if you can guide us like near term, how should we think about it? Because I mean, holding cash would, obviously, not help our DPU growth in that sense. So paying off debt would enhance the yield potential. So how should we look at that?

So yes, definitely, we would be looking at pairing down some debt in the near term. We are, as I mentioned, in the process of evaluating which line of credit should we look at across various [indiscernible] as I said, that would also depend on some guidance and clarification that we get from sponsor group on the time line when they expect to launch the process for some of the sponsored assets that we've mentioned. Pending that, as I said, we are in the process of evaluating, on a short-term basis, which line of credit to be sort of prepaid as we speak.

I'll just come in here. Good morning, everybody. From a sponsor side, there's a very large portfolio of the highest quality assets in the country that we are -- that we have while in the near term, yield or yield protection or yield enhancement can happen with a decrease or a slight decrease in debt levels. I would say that these opportunities in India on a total return basis are in the mid-to-high teens, just like the GBKC acquisition that we just announced. On a total return basis, given our LTV is 25% or thereabout, there is significant headroom to increase the same portfolio while keeping leverage levels below 35% on a portfolio basis, which has been a serious strategy that we like to be 1/3, 2/3 on debt to equity basis. And the path that we demonstrated an ability to raise capital on the market for major transactions. I would say that the guidance from our side is growth than just debt levels being lower from this point onwards. Two transactions were highlighted besides the GBKC transaction, the one that we are just completing, the lease up in Andheri and Andheri development as well as a CBD asset that we've developed in pulling and continue to stabilize. Again, those are 2 examples. There are several assets of that nature. And as Shashank mentioned, there are also amazing opportunities across non-sponsor assets as well. So I would say that the guidance I can provide from our perspective is is total return, which includes NAV enhancement, distribution growth as well as feel enhancement.

Our next question comes from the line of Yashas Gilganchi with BOB Capital Markets Limited.

When do you expect to conclude the acquisition of the GBKC asset and since cap rates have been calculated on the NOI of FY '28, '29, is it fair to assume that the rent from the new property are likely to start flowing in sometime in FY '28?

Yes. So we are looking at closing the transaction somewhere by the end of next month. As we mentioned, it's a significantly leased asset, and we expect by closing it to be 100% leased up. And you're right, the the rent should start on a 100% basis in the next fiscal year.

Got it. Now with 90% of your outstanding debt referencing floating rates and given the volatile macro environment, or your thoughts on how interest expenses are likely to evolve over the near future? And also, are you considering any measure to control further volatility in interest expense?

Yes. So look, our debt is almost 90% of the debt is floating, but bulk office is linked to reported, right? And any volatility in reports that we pause, I would say, any movement in the interest expenses. In fact, if you think about our interest rate ranges anywhere between sub-7 rates to mid-7 rates today, averaging about 7.3%. So we don't expect that there will be out of turn volatility in these rates under the central bank books the repo. But at the same time, we continue to evaluate fixed rate structure, we impacted a bond not too long back. And the idea would be, as we think of the next phase of growth and next acquisition, and we relevered the REIT, fixed rate bonds will continue to be a big source of consideration for us to finance the future growth from this point onwards.

Got it. That's fair. And just lastly, releasing spreads have been trending downwards actually since 1Q '26, given as larger volume of space will be used, what is happening? And how do you think spreads are likely to trend over the long term?

If you see our history, generally, the releasing spreads that we have managed to achieve the last 3 fiscal have been the support of anywhere between 15% to 20%. And on an average, about 10% of our area churn every year, about 50%, 60% obviously managed to renew 30%, 40% churns out and we get new tenants in. I think it will look to be very similar as we go along. So we will continue to have that 15% to 20% [indiscernible] 10% of area, so additional percentage point or 2 percentage points of growth every year on a steady-state basis. So we don't expect that the forward projection for this will be any different than what we have seen in the last few years.

Our next question comes from the line of Kunal with Bank of America.

A couple of questions from my side. The first one given the 60% renewal you were highlighting has happened on the IT services side, do you see any difference in the commercial attractiveness of renewal deals with IT services in comparison with a GCC, wonder if there's a delta in terms of either the mark-to-market uplift you can get, the tenure that they signed for or maybe the expansion potential that the indicate?

So we continue to evaluate each transaction base is the micro market and our campuses. When it comes to GCC or tech services, I think the approach is no different. We approach it and equally all our clients approach it with the same commercial bent of mind considering various factors; their existing presence, concentration, potential to expand in the same campus or the same micro market and the trending rates in the micro market and the mark-to-market potential. I mean if you look at some of our large renewables that we've had like Accenture, et cetera, I think it's been a healthy commitment that we've got from them.

Understand. Specifically on MTM conversion, do you think that is there any bit of better or the overall approach you are highlighting takes care of it?

Kunal, just to give you an example, and we actually did cover in the last quarter, but maybe I'll just skew that to guide this conversation. One of the largest tech services companies actually took up expansion space with us in Noida, almost tripling their footprint, right? And on that -- and the way it came about was their own manpower planning with a decent 10-year term and a 5-year lock in but the rates on that, to answer your question very specifically, we managed to get a 25% mark-to-market. So I think the outcome is fairly market, even when you're talking to tech services in many of these takeups. Of course, renewals can be slightly different from new takeups. But again, the outcome that they're solving for is the market trend, just given vacancy, many of these markets is now single digit. -- certainly in the ones that we operate in. Anybody who wants to be present there has to pay the market rent, and that's the trend for the past 2 examples that we have.

Just to add on. In so many ways, you've seen a little bit of baking up of tech companies and putting out their messages even more clearly. Certainly, playing on the front foot as to what ages in the AI-based economy or whatever the promise of AI in terms of efficiency means for the company. So we expect that these companies will actually be a little bit more forward-thinking. In fact, the question 4 years ago used to be will IT companies continue to support rentals or does they have too much bargaining power, et cetera. I think that equilibrium is now reached where a significant majority of new leases are contained by a wide variety of companies. The other aspect is -- so one is that IT companies will be more nimble. They will have to scale up or they are scaling up in the delivery models, et cetera, which means higher-quality, talent, higher-quality basis as a result of that. And second, the line between service and delivery and headquarters is blurring. GCC is a perfect example. They again -- the global delivery centers, they are no longer outsourcing offices, et cetera. And as a result of all of that, you find that higher quality spaces, better quality landlords, better locations, better connectivity. Rentals will become rentals or whatever the implied renters are are going to be only one factor. Now again, we have the best quality portfolio, and that all augurs very, very well for our type of real estate [indiscernible].

Understood. Very clear. My second question, I got again, this is sort of going back to the 3 aspects of what you look at in terms of driving the return for you as you look to the the remaining gap out on the balance sheet. The question was more around, given that the overall market trends have moved up, interest rates have done what it is. How do you think your forward written expectations from M&A that you might have in the pipe, start to differ from what you have done in the last 2 to 3 years?

I would say that on the M&A side, as has been the trend, majority of M&As will be focused on built assets. In our experience, India as a supply probably now a demand-side problem, which means that we can continue to acquire high-quality assets. On a total return basis, these assets will continue to outperform the market, which means whether we showed 15% total return, and usually, if we buy the highest quality assets and manage very well, they outperformed. And beating the market cost of capital consistently with performance is what we have set out to do. I don't think that our current pipeline and our future projections should look very different. In fact, we've outperformed virtually in every acquisition that we've done in the past. And I think with the occupancy levels now in the '90s, those assets that we bought is will do even better. Kunal, if I can answer your question, I think if you are doing something good, then repeating that and doing it slightly better is the way to proceed.

Understood. Just maybe just one more once on that, do you set for yourself a minimum return hurdle in that sense?

Absolutely do. Many of return is beating our cost of capital, which you had that for us, to be honest, also the value [indiscernible] and in all the acquisitions, we've tried to better that in terms of it being better than the cost of capital and on a return basis, be accretive on an NAV basis as well as on a [indiscernible] basis. So I think there are very people that try to follow and guide. As I said, it's not a complicated business. We're not sending atoms here. So if you can do the basic rights and repeat and do it slightly better every year, we'll do very, very well overall.

Our next question comes from the line of Nilesh Doshi with Prospero Tree AMC.

Sir, distribution is one of the criteria to remain invested in any REIT, so I would like to know at what rate our distribution is likely to increase in the coming years as our lease agreements mostly contained a 5% increment every year or 15% at the end of the 3 years? And in addition to that, all new lease agreements are generally executed at a higher rate than the expiring rate. And every year, we are increasing the economy occupancy. So I think our distribution must be increased by more than 5%. Is it my correct understanding, please, your view?

As we have given in our guidance, we are looking at -- to be specific, a 15% embedded growth in our DPU from the current portfolio that we have as and when it stabilizes, and we are at about 93% occupancy. We've given a guidance of 96%, 97%. For some of the assets that we have or we have acquired, once they are fully leased and the lease up happens, we are looking at a 15% growth. So give and take, our senses, it will take about 2 years on an as-is basis. So to answer your question, yes, that there will be a more than 5% increase.

Because of -- sorry.

Same quarter last year, we distributed INR 5.20, we are distributing INR 5.60 now. That's a 7% growth over the same quarter last 12 months, right? So that should be the trend. I mean, if the income grows at 5% to 6%, you should be able to drive DPU by 7% to 8% in addition to the yield.

Because when you say the total return is around 14% to 15%, and our current yield there is around 6%. So 9% by the capital allocation. Is it like that?

When we say 15% to 16%, that's for the asset level return under the REIT, what reflects in the stock price as a function of the market as well and the larger interest rate regime. But again, broadly speaking, if a product starts at 6.5% to 7% yield, right, on an equity basis and has 5% to 6% top line growth with leverage that should translate to about 7% to 8% bottom line growth. So if you add 7% to 8% to a 7% yield, you would emerge at a 14% to 15% return. I don't know if that answers the question.

Yes, mostly. And sir, last question, what is the economic occupancy because you mentioned that 93% is the committed occupancy, but there is a difference between the committed and rent generating occupancy. So what is our actual rent generating occupancy?

So typically, you will see a delta of 3% to 4%. Our rent generating occupancy should be about 89% to 90%.

And we are at 88%, 89%.

We are at 89%, that's why I said our rating is about 89%, 90%.

Next question comes from the line of [indiscernible] with New Wealth.

2 questions from my side. Number one, what's the dividend mix in the entire distribution going ahead? And amongst the dividend, what would be the rough split of dividend coming from old and new regime? And what would be the impact considering the recent changes that we are anticipating? And the second is, in general, I've seen that Brookfield is doing a JV kind of an investment [indiscernible] the earlier age portfolio or the current investment. So why is it so that we are going for JV kind of investment, whereas other REITs are in general, trying to acquire the entire asset. I wanted to know the thought process?

Your question is 3 parts. Let me take all the parts one by one. So our current dividend distribution percentage is about 17% out of the total DPU. With some of the corporate actions we are looking at a few SPV levels and relooking at the capital structure on an overall basis, we expect that to increase to I would say, early 20s. And then the second part of your question is the impact of tax legislations around some of the tax benefits that have come in. Again, it has got 2, 3 elements, which we are currently in the process of working out the exact impact. One is obviously the historical MAT credit write-backs. The other is the tax rate change. As you know, we were in the old regime, ranging from 29% to 34%, 35%, which will -- in the new regime will be 28% plus. And the third component of that is no MAT liability going forward. So we are -- as we speak, we are in the process of working out the exact impact which will come back to the broader group in due course once we've sort of worked out the math around it. And the third element you asked for, a joint venture approach there. As REIT as buyer of these assets, I can tell you, we participated in a formal process that the sellers embarked upon, for example, for GBKC, we were amongst the top shortlisted bidders. And so was Nuvama, who we decided to partner with it, therefore, because we were ballpark in the same rate. That also demonstrates our willingness and our ability to partner with the broader ecosystem in the market, whether it's Nuvama whether it's other such players, we do believe in benefits of strategic relationships with with wealth channels and coverage channels like Nuvama. And we will continue to be a disciplined investors where we can maximize the returns for our investors.

[indiscernible], I'll just add that by the virtue of the fact that we have traditionally went up the larger real estate and larger campuses, most of them are at the scale of anywhere between 2.5 million to 4 million square feet, which kind of means that our revenue in each of these SPVs is more than INR 200 crores. So the old cash setting versus tax regime has an 8 percentage point savings on the tax itself, which is a big, big flow through straight up to number one, to the direct savings to the SPV that will distribute, but also it will improve the dividends and the PAT as a result of that. So overall, I think it's going to be a positive. We will quantify at our end, understand this in a little bit more detail and maybe next quarter, you'll have a full level of disclosure, a full disclosure from us around what it means for [indiscernible] in addition to the point that Shashank mentioned on to MAT liability going forward.

Got it, sir. Sir, just a follow-up on this. If, let's say, I want to break up the total entire JV of the BIRET in to old and new tax regime. So how much would this breakup be roughly?

Everything today is old tax regime. Everything will move into the new tax regime is the mathematic mix.

Our next question comes from the line of Anuj Upadhyay Investec Capital Services India Private Limited..