Embassy Office Parks REIT (EMBASSY) Earnings Call Transcript & Summary

Good evening, everyone. A warm welcome to all for Embassy REIT's Fourth Quarter FY 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I now would like to introduce your host for today's conference, Mr. Abhishek Agarwal, Head of Investor Relations for Embassy REIT. Sir, you may begin.

Thank you, operator. Welcome to the fourth quarter and full year FY 2023 earnings call for Embassy REIT. Embassy REIT released its financial results for the quarter and financial year ended Mar 31, 2023 a short while back. As is our standard practice, we have placed our financial statements, earnings presentation discussing our performance and a supplemental financial and operating data book in the Investors section of our website at www.embassyofficeparks.com. As always, we would like to inform you that management may make certain comments on this call, that one could deem forward-looking statements. Please be advised that the REIT's actual results may differ from these statements. Embassy REIT does not guarantee these statements or results and is not obliged to update them at any time. Specifically, any financial guidance and pro forma information that we will provide on this call are management estimates based on certain assumptions and have not been subjected to any audit review or examination procedures. You are cautioned not to place undue reliance on such information and there can be no assurance that we will be able to achieve the same. Joining me today are Vikaash Khdloya, the CEO; Aravind Maiya, the CEO Designate; Abhishek S. Agrawal, the Deputy CFO; and Ritwik Bhattacharjee, the CIO. Vikaash, will start off with business and industry overview, followed by Ritwik and Abhishek. We will then open the floor to questions. Over to you, Vikaash.

Thank you, Abhishek. Good evening and thank you all for joining us on the call today. We recently completed our fourth year since listing, continuing our strong business performance and accelerating our growth investments. While we will take you through the details shortly, I'm pleased to report that we have once again delivered on our annual guidance. In the last fiscal, we added 44 new occupiers and leased a total of 5.1 million square feet across a record 100 deals, including 2 million square feet new leases at 17% re-leasing spreads. We activated 2.3 million square feet new on-campus development at highly accretive yields and announced an NAV accretive tuck-in acquisition in North Bangalore. We generated healthy 11% net operating income growth ahead of our guidance. Moreover, despite the rising interest rates, we delivered on our distribution guidance of INR 21.7 per unit, marking our 16th consecutive quarter of 100% payout and taking our overall distributions since listing to over INR 78 billion. On the balance sheet front, we refinanced or renegotiated INR 53 billion debt at 101 basis points positive spreads. We maintained a low 28% leverage and a competitive 7.2% debt cost. So a fantastic year overall, and we are pleased to deliver to our unitholders. On the macro front though, global economic and capital market volatility continues with both inflation and interest rates at elevated levels. This has led to considerable stress in the global CRE market, resulting in widespread earnings decline. Amid this overall cautionary backdrop, Indian REITs have remained resilient as India office remains a bright spot, given its dual structural advantages of abundant STEM talent, and low cost. Global companies are setting up and expanding the captive centers in India and despite the layoff headlines, they continue to hire talent here, especially in critical business areas like R&D and Product Engineering. Although there might be near-term delays in office deal closures till the macro uncertainty abates, increased focus on cost and efficiencies by global corporates will eventually accelerate the India offshoring trend. At Embassy REIT, our conviction in the India office opportunities remains strong as ever, especially for institutionally managed Grade A properties. Our view is further corroborated by NASSCOM's recent industry report which outlined that just last year around 100 new captive centers were set up in India and 500 more are planned over next 3 years. We continue to capture demand from these global players through our premium wellness-oriented properties and focused investments in the most sought-after micro markets. On the regulatory side, the government and regulators have been very supportive of the REIT product, and they continue to improve the framework around management, operations, financing, and taxation of this emerging asset class. While the industry awaits further progress on the SEZ front, the recent amendments to the Finance Bill brought in much needed clarity on taxation of repayment of debt component of REITs distributions. Given the clear, stable and tax efficient framework, we are confident that REITs will continue to attract domestic and foreign capital. The recent launch of a REIT and InvITs index by NSE further helps raise awareness, as well as increased liquidity for a total return product. On the ESG front, just last month, we hosted our flagship event, themed: "In it together for a better tomorrow", where we collaborated with over 200 of our occupiers on sustainability strategies. In addition, we commissioned the first phase of a 20-megawatt solar rooftop project and announced plans to explore doubling of our existing captive solar capacity. Our industry-leading ESG program received several global recognition during the year from GRESB, USGBC LEED, British Safety Council and WELL at scale certification from IWBI and we continue to progress on our FY '25 ESG targets as well as our broader net zero 2040 goal. Our ESG leadership remains the key business differentiator and a driver of the premium rents. Finally, I'm pleased to confirm that the Board today has approved the appointment of Aravind Maiya as CEO for Embassy REIT effective 1st July 2023. Aravind is known to many of you as he has been part of our leadership team earlier, playing a pivotal role as the REIT's CFO. After an incredible 12-year journey with Embassy REIT and Blackstone earlier, I believe the time is right for me to pursue other interests and passions. It has been a privilege to lead Embassy REIT, and I'm proud of the team and the results we have achieved over the last 4 years since our listing. I will now pass it over to Aravind to say a few words.

Thanks, Vikaash. Good evening, everyone. It's an absolute pleasure to be back, and I look forward to working with the team and interacting with all of you. Let me now hand it over to Ritwik to present our business and operating highlights for the year.

Thank you, Aravind. Hello, everyone. Before I begin, I would like to say that it's been a privilege working with Vikaash over the last 5 years. He has been a driving force in bringing the REIT to where it is today. It's also a pleasure welcoming Aravind back into the fold, and I look forward to resuming our partnership at the REIT. So let me start with the business and growth highlights for the year. We leased 5.1 million square feet across 100 deals, and we surpassed our annual leasing guidance of 5 million square feet. We have grown our active development pipeline to 7.9 million square feet, over 90% of which is in Bangalore, that's India's best-performing office market, and we announced the tuck-in acquisition of the 1.4 million square feet Embassy Business Hub park that further expands our strong presence in North Bangalore. On our leasing performance. We've leased 5.1 million square feet across 100 deals, which is comfortably the highest over the last 7 years, both in terms of the area leased and the number of deals. This includes 2 million square feet of new leases at 17% leasing spreads and at a premium to market rents, as well as 1.8 million square feet of end-of-tenure lease renewals at 16% renewal spreads. We've also secured 1.2 million square feet of pre-commitments for our under development projects, driven by the expansion of our existing banking and financial services captive occupiers. Factoring our 2.2 million square feet of exits during the year, primarily from Indian IT services occupiers, our Q4 occupancy stood at 86%. It's instructed to note that our non-SEZ occupancy stands at a healthy 93% on the same-store basis. Both demand and supply trends increasingly point to a strong preference for non-SEZ office space. We're seeing some key trends in the market. First, Indian office demand continues to be led by global captives. Captives contributed around 70% of our FY '23 new and pre-leasing, and now accounts for over 55% of our annual rent. Second, corporate from sectors such as retail, insurance and healthcare, all of which rely on technology and are increasingly embracing digital footprints, are also setting up and then rapidly scaling their India captive centers. In just the last year, we've added 44 new occupiers in these kinds of sectors, among others across our properties, and we've successfully leased 1 million square feet to them. Third, while large deals are currently scarce, most markets are witnessing some healthy traction for small to mid-size deals that range between 30,000 square feet to 70,000 square feet. Our highest ever deal count up a 100 deals last fiscal year at an average deal size of 40,000 square feet, underscores this trend. We're also seeing occupiers who had earlier exited or reduced their office footprint now reengage the new space requirements. We expect deal activity to pick up later this year, and we're well positioned with over 800,000 square feet of an active deal pipeline for our existing operation portfolio and an additional 1 million square feet of pre-commitments for our underdevelopment portfolio. On our development portfolio and our hotels. During the year, we continued to launch, build, and deliver state-of-the-art buildings to cater to the momentum we see in office demand In the years to come, particularly in Bangalore. We delivered 2 projects across Pune and Bangalore. The 900,000 square feet at Hudson and Ganges blocks in Embassy TechZone, Pune, which is now being de-notified as a non-SEZ block and the 1 million square feet M3 Block A in Embassy Manyata for which de-notification is underway and the occupancy certificate is also expected next month. We launched 2.3 million square feet in Bangalore across 3 new projects, including the first of its kind D1, D2 redevelopment in Embassy Manyata, and the new Helenium Block in Embassy TechVillage, through which we've enhanced our FAR by 1.2 million square feet, and we've accelerated the 3.3 million square feet in Bangalore and Noida across 3 ongoing projects. Of these, as we mentioned previously, the M3 Block B development is delayed due to the non-availability of Transferable Development Rights or TDR and other related approvals, but all efforts are on to meet the committed delivery timelines. Including Embassy Hub, our total development pipeline is now 7.9 million square feet, most of which is either in the process of de-notification or planned as non-SEZ at inception. These active developments will be delivered over the next 4 years at a INR 40 billion total committed CapEx, of which INR 28 billion is pending cost that is to be spent as of year-end. These projects are expected to add approximately INR 9 billion of annual NOI upon stabilization at attractive yields. By design, over 90% of the growth pipeline is in Bangalore, which is the most attractive office market in India, both in terms of occupier demand and development economics. A fifth of our development pipeline is already pre-committed to leading global companies such as JPMorgan, ANZ Bank and Philips. Additionally, we have around 1 million square feet of an advanced deal pipeline from banks and other tech captives that specialize in cloud infrastructure and enterprise solutions. We are confident of stabilizing these properties within the year or so of their launch. As an example, with 1,62,000 square feet of new pre-commitments in Q4 and an additional 3,25,000 square feet of advanced discussions, M3 Block A is expected to be around 50% pre-committed at the time of delivery. A quick word on our hotels, as you might recall, we've launched 619-key dual-branded Hilton hotels at Embassy Manyata early last year, and we achieved breakeven levels within the very first month of the launch. Our overall hospitality business continues its strong rebound with 50% occupancy of 57% ADR growth and an annual EBITDA of INR 982 million, that's over 2x our guidance. We continue to invest in the development of the 518-key dual-branded Hilton hotels at Embassy TechVillage. On our latest acquisition. Last month we announced that the REIT would acquire Embassy Business Hub, a campus style business park in North Bangalore for a total consideration of INR 3.3 billion, close to both the airport and to the REITs flagship Embassy Manyata property. Embassy business Hub cements the REITs dominant presence in North Bangalore, a micro market that continues to witness an influx of global captives. After 1.4 million square feet acquired, 0.4 million square feet is nearing completion and 93% pre-committed to Philips and provides stable cash flow visibility. The balance 1 million square feet is in early stages of development. Additionally, we have secured a right of first offer, future phases of this property that totals 46 acres. This further extended the REIT growths options. The REIT followed stringent related party safeguards and acquired Embassy Sponsor's affiliates' share of the 1.4 million square feet of total leasable area in the property. This small acquisition, which accounts for less than 1% of the REIT's JV was priced at a 4.5% discount to the average of the 2 independent valuations. The NAV accretive acquisition was financed through debt, which we secured an attractive 8.1%. We do continue to evaluate other acquisition opportunities while closely tracking with capital markets, which continue to remain challenging for raising new capital. As we stated previously, we are focused on ensuring that all acquisitions are strategic to follow relevant governance safeguards and a value accretive to our unitholders. Over to Abhishek now for our financial updates.

Thank you, Ritwik, and good evening, everyone. Let me start with the financial highlights for the year. We grew NOI by 11% year-on-year and surpassed our guidance by 2.3%. We delivered distributions of INR 21 billion or INR 21.71 per unit in line with our guidance. And we refinanced -- renegotiated over INR 53 billion debt at 101 basis point positive spread with our in-place debt cost at an attractive 7.2%. Let me take you through the details. First, an update on our full year -- financial year '23 income performance and distributions. Revenue from operations grew by 15% year-on-year to INR 34 billion. This was mainly driven by new lease-up at attractive re-leasing spreads, contractual rent escalations, new deliveries and a rebound in our hotel business. This was partially offset by the impact of exits in our office portfolio. NOI and EBITDA, both grew by 11% year-on-year. This was primarily driven by the increase in revenue from operations, partially offset by increased hotel operating expenses corresponding to the ramp-up in our hotel business. Our NOI and EBITDA margins stood at 81% and 79%, respectively, and continue to be the best in class. In fact, for the commercial office segment, our NOI margins consistently remain around 86%, demonstrating our scale and efficiency. Net distributable cash flow stood at INR 21 billion, in line with the previous year. The year-on-year increase in our NOI and EBITDA contributed positively to our distributions, which was primarily offset by an increase in interest costs. This incremental interest cost was mainly related to our recently delivered buildings, the INR 46 billion coupon-bearing debt raise to refinance our earlier zero-coupon bond and rising interest rates on our floating debt. Further, earlier today, our Board of Directors declared Q4 distributions of INR 5.3 billion, or INR 5.61 per unit. This brings our financial year '23 distributions to INR 21 billion or INR 21.71 per unit, which is in line with our guidance despite considerable rate hikes in the market. Moving to our balance sheet and other financial updates. We continue to maintain our fortress balance sheet with low leverage of 28%, attractive 7.2% in-place debt cost, dual AAA/Stable credit ratings and a INR 104 billion pro forma debt headroom to finance growth. Further, in line with our ESG commitments we have considerably grown our sustainable finance portfolio to INR 35 billion, which represents 24% of our total debt book. Our debt strategy remains focused on active capital management and interest cost optimization. During the last financial year, we raised a total of INR 41 billion debt at competitive 7.8% interest cost even amidst continued rate hikes. We refinanced or renegotiated over INR 53 billion debt at 101 basis point positive spreads, resulting in INR 537 million annualized pro forma interest cost savings. 61% of our INR 148 billion debt book now carries a fixed rate of 6.7% for an average maturity of 22 months. The balance 39% is floating debt, which carries a fixed interest rate for an average of 5 months. With this, while we are not fully immune, we remain relatively better placed even as rising borrowing costs continue to impact the entire industry. Moving to an update on our year-end portfolio valuation. As per the independent valuer's assessment, our gross asset value increased by 4% year-on-year to INR 514 billion and our net asset value remained in line at INR 394.88 per unit. This change was mainly driven by our new deliveries, ongoing development CapEx, improved hotel performance, and changes in leasing and property level stabilization assumptions. In conclusion, I would like to reiterate that we are conservatively financed have access to diversified sources of capital and are well-placed to navigate the current volatile macro and rate environment. At the same time, we remain well positioned to invest and deliver on our growth in the coming years. Over to Vikaash, for his concluding remarks.

Thank you, Abhishek. So another very solid and encouraging year, marking our fourth year anniversary since listing in April 2019. Over the last 4 years, our team has accomplished a great deal. We raised the scale of our portfolio from 33 million square feet at inception to a massive 45 million square feet today. We leased a total of 11.4 million square feet across 257 deals, achieving 22% leasing spreads and expanded our occupier base by 1/3 to 230 corporates. We delivered 3.4 million square feet of new office space and launched 7.9 million square feet new developments, including the first Grade A office redevelopment at scale. We acquired a world-class business park in ETV totaling 9.1 million square feet, and raised over INR 36 billion of equity to India's first QIP by REIT. We refinanced or renegotiated around INR 143 billion debt in reducing our interest cost by around 204 basis points, and we're the first to access long-term debt from NBFCs and insurers in Indian REITs context. We also launched our industry-leading ESG framework and net-zero 2040 commitment. And finally, we enhanced our NOI by 76% to INR 28 billion, delivered close to $1 billion in distributions and expanded our investor base by 18x to over 75,000 today. Looking forward, we have a clear strategy to further solidify our business and execute accretive growth to cater to the continued offshoring demand for India's talent and thereby office needs. As long-term asset owners, we continue to enhance the scale, quality, and reach of our properties, as well as occupier base, which has undoubtedly delivered value across business market and economic cycles. We have an excellent team of over 110 very talented professionals, who are committed to execute the strategy and are driven by our ultimate goal of maximizing value for our unitholders. With this, let's now move to Q&A, please.

[Operator Instructions] We take our first question from the line of Murtuza Arsiwalla from Kotak Securities.

A couple of questions from my side. You've talked about in your presentation about how almost 70% of new leasing is coming from the GCC space. Could you give more outlook of what the year ahead looks like from this space? Because we've been tracking some data on service exports, which also is indicating a lot of strength on the GCC? Second is I didn't seem to find any guidance for FY '24 in the earnings deck, any specific reason for it, or you would like to sort of get a handle on the numbers a quarter or 2 quarters out? How are you thinking about that? Third question is both sequentially between the third quarter and the fourth quarter, the hotel segment, seems to have seen some NOI margin compression. Any specific reason for that? And even the sequential decline in NOI for the commercial, the office business, which you've not seen before? And last but not least, thank you Vikaash, for the long service that you provided to the REIT and welcome back Aravind, but would you like to elaborate on what prompted the change or what's better that holds for you? So those are my 4 questions.

Thank you, Murtuza. So quite a lot of questions there, let's just get the big one out there first. So Murtuza on the management change after an incredible 12-year journey, I believe the time is right for me to pursue other interests and passions. So it's been an excellent run and by the way, we have a solid business and a great team in place. So with Aravind back, I think it would be fantastic as we move forward. And I think now the time is right for me to pursue some of my other competing priorities which is family new business interests and fresh challenges. So I think the business -- REIT business is in great shape I think today, and now is the right time. Again, I would say there is 110 professionals and experts in the company and it's all about the team, and not a particular individual. So I think -- the REIT and the investors are in good hands. With that, I'll just quickly move to the other 3 questions. For GCC, we completely agree with you. We are seeing a trend of lot of growth both new GCC's setting up shop in India, 100 of those setup in CY '22 as per NASSCOM report. Of the 100, 66 were new and 30 were new centers by existing GCC, and then we have the expectation is that there'll be 500 more in the next couple of years. Even in our own portfolio, we see the same trends of a lot of captives wanting to set up shop small scale at cost and then rapidly keep expanding. I think in general, this is a great trend simply because with the recessionary trends, with the overall drive to optimize costs and efficiency, we'll see more and more work getting offshore to India. And I think that augurs very well for especially for high quality landlords like ourselves who are offering total business ecosystem product. Because Murtuza, these GCC's are the guys who are ready to pay. They want the best of ESG. They want the best of quality, and they do not mind paying premium rent. Again, it's still embarrassingly low rents of $1 a foot per month in India. So I think we'll see more of that trend. In fact, even in our own portfolio, ITES, the IT services segment, which constituted about 25% of revenues at IPO, is now down to 15%. And we have also consciously stuck to whether it's global captive for other high quality occupiers who have growth potential. So I think you'll see more of that trend. And I think it's a good thing, especially for higher quality landlords who have better product.

If I may, Vikaash out here what would be GCC's in your overall portfolio, just like you said ITES would be up 15%?

Yes. So GCC's would be about 55%. And then product tech, sometimes product tech could also be considered GCC. So there is an overlap. So that would be around another that would be 15%. For GCC's and product tech put together would be 70%, which I think is 2 segments which will continue to see more offshoring and growth. Yes, I think just on that Murtuza, I think the key takeaway there, as well as that IT services and particularly the Indian IT services is going to dwindle right. I think the way that we position the portfolio to a multinational base, a base that's increasingly looking beyond sort of just big tech, or you look at some of the big financial companies as we sort of are out there trying to be a more of a manufacturing hub, as we are moving, trying to be sort of more market share away from China, you're going to see sort of other sectors be a bigger part of this portfolio, and I think that's also the areas that we're focusing on. So Murtuza, why don't I then quickly move either guidance question. I think that's a great question. So Murtuza, as you are aware, we've completed 4 years. We have consistently delivered on the guidance what we have laid out for our unitholders. For now, we are not giving any guidance for FY '24 simply because of this continued volatility in the global macro environment as well as uncertainty around the SEZ regulation timelines. However, we would be happy to give some building blocks to everyone on the call and you for FY '24. Can I request Abhishek, if you could help take through some of the building blocks in respect of FY '24?

Sure, Vikaash. And Murtuza, let me give this building blocks through a couple of points. The first being on the leasing, so we'll continue to have some short-term caution for larger deals, but we are seeing encouraging momentum with high growth tenants. As you saw during the current year, financial year '23, we did some 44 deals across this high growth tenants, but -- and we expect some positive churns also. But what we have seen is that most of our vacancy is SEZ related vacancy. And considering the expiries of the next year, we will have around 4.5 million vacancy of SEZ space, which is significant. And to the timeline and the rentals that which we will be able to leave this also depends on the DESH Bill, which is expected or any changes in the SEZ any amendment in SEZ Act. We are positive about it, but then we have to be cautious and wait for that. As and when it comes, we will be able to market this SEZ statement. So that is one, which Vikaash was also talking about. Second, on the contracted escalations what I would point out is that during the last year, we had 8.2 million square feet of leases where contracted escalations were up, and we were able to achieve the whole of them with 14% escalations. And we are confident that for the next year when 6.7 million square feet comes up for escalation across 78 deals, I think we will be able to meet that 14% escalation also. For the hotel business, which is my third point, if you remember, we had given a guidance for the hotel and the actual performance has been almost double of that. So we continue to see the same upward trend and we expect that it will do even better. The last and one of the points is interest cost obviously. So definitely that is dependent on the trajectory of the market rate movement, which is very volatile as of now. But what I would want to give you as a building block is that we had delivered 0.9 million square feet during the last year. And we expect to deliver around 2.1 million square feet during this current financial year. And the interest cost relating to this 3 million square feet which was going and getting capitalized in the financials. Now it will go and hit the P&L. While these deliveries will take some time to stabilize because the lease-up will take some time. We also have around INR 4,100 crores of NCDs which are currently at an average cost of 6.61 percentage that also comes up for refinance somewhere around later part of the year. Definitely, you know that interest rates have moved over the last 12, 15 months, it has moved by 250 basis points. So definitely it will reprice itself and hit the P&L. The last part that I would want to say on interest rate is that we again have around INR 57 billion of debt, which is at floating rate with an average maturity of 5 months, as I mentioned in my prepared remarks. Currently it is at 7.98% interest rate, but that also comes up for repricing within the next 5 months. So coming July to August that will also reprice. So all of this will take a toll on the interest cost. But having said that, yes the biggest point is the SEZ because of vacancy is significant. We expect along with the expiries which is coming up, 4.5 million, which is there for the next year. And there are -- and we await some guidance from the amendments. So that's there. Lastly, I would say, I would reemphasize that we are running the business for long-term, and we are committed to deliver our growth to our unitholders.

Great. Thank you, Abhishek. And would you want to take the fourth question on the NOI sequentially down both for the hotels and office segments?

See, Murtuza, on the hotel part if you see my NOI is actually down by INR 4 crores, which is 4% compared to the sequential quarter. This is largely because of the repairs and maintenance expense that we have done for our existing hotels, so that we can gear up for the next year. On the commercial business, if you see -- there is a decline in the NOI that is largely because there were certain manpower cost which has come in the last quarter. So the manpower cost in Bangalore has increased a bit, which is the major reason. And also we had delivery of one of the asset that is [ H&G ] and the corporate tax for that has increased.

So Murtuza, just generally quarter-on-quarter I would guide you to seek a more full year basis, because they are property tax which we pay in one quarter relating to the full 4 months -- 4 quarters and again CAM true ups happen at the end of the quarter -- at the end of the year. So sometimes there may be variability on a full year basis. I don't think there's anything significantly different that's happened in Q4 compared to the full year if you look at it on a holistic basis.

We take our next question from the line of Mohit Agrawal from IIFL.

So best wishes Vikaash for your future endeavors. Thanks for contribution and congratulations, Aravind. Good to have you back and elevated as the CEO.

Thank you.

Yes. So I had a couple of questions. Firstly on the expiries bit, last presentation showed that FY '24, it will be 0.9 million square feet of expiries. That number has gone up to 2.5 million. So could you elaborate where the increase has happened and is it SEZ, non-SEZ?

Sure, Mohit. And would you want to ask the question as well?

Well, my second question is actually on the SEZ bid. Last couple of quarters, you've been talking about doing partial de-notifications. So I guess that we've talked about in the Pune block already being now non-SEZ. I think the Noida was also under process. So could you explain with basically getting delayed. How is the progress on that partial de-notification thing happening?

Great. Thank you, Mohit. First, thank you for the wishes and let me take both the questions. On expiries, I think as you pointed we had in the last presentation, 0.9 million square feet as expiries for FY '24. If you see we have increased that number to 2.5 million square feet in the latest presentation. So what happened is, in this quarter we have received certain exit notices. And also these assets likely exist based on our ongoing conversations to the tune of 1.6 million square feet. Now again, this 1.6 million square feet to just break it up, has a 35% mark to market and primarily this 1.6 million square feet relates to 1 million square feet of space at Manyata and a 500,000 square feet space at Galaxy, both of which on a combined basis is at 38% mark-to-market. So overall I think we have just said that these are expiries, we have not given a split between exits or renewals. So I would just want to kind of make that comment that the 2.5 million square feet are expiries. It will comprise both of exits and also of renewals and a major chunk of this is coming from IT services players. And I'll come into what's happening as a trend on the IT services player and also more, a large portion of this SEZ. So let's tackle both IT services and SEZ. IT services, these players have right now high focus on margin conservation simply given that they are anticipating a slowdown. And they want to be cost efficient and also the hiring has slowed down. Our exposure in the portfolio is just 15%. But we do expect a positive churn as our occupier base pivots to GCC, global captives who have higher paying propensity. So large chunk of this is IT services companies. Again, I would just want to make a broad comment that we view churn as good for the business in the medium to long-term. And especially both the Manyata and Galaxy, additional note, this our assessment that we have made on expiries. They are in dense residential catchments, and hence we are very confident of achieving those 35%, 38% mark-to-market I mentioned earlier. So this is on expiries. And we think this is a continuation of this trend we have seen earlier where the legacy leases and occupiers, especially IT services occupiers in SEZ, they are looking to both pruned down space due to corporate housekeeping and consolidation. We are seeing a lot of it the last 2, 3 years. I think we are seeing a few additional of those in this quarter we saw. So that's pretty much on the expiries. In terms of the SEZ, I think that's an interesting question. Let me break it down into what's happening in our portfolio today. We have about 4.9 million square feet of vacant space as of the end of March. 3.3 million square feet of that is SEZ and 1.6 million square feet is non-SEZ. And Mohit what's happened is against the 3.3 million square feet of vacant available marketable space -- there is very little industry -- sorry, there is very little interest, not just for our property, across the industry for SEZ space, again because occupiers have moved higher up the value chain. We are focusing on the captive and -- the total business ecosystem, higher propensity to pay, markets moved -- matured to that occupier set. So what that means is that all that I'm able to offer market today is the 1.6 million square feet non-SEZ. So this has become an industry-wide issue, and the numbers are staggering in terms of the total SEZ space in the industry, 180 million square feet or 30 million square feet of just today existing vacant space, right? So that's one. Even as you look forward and clubbing your both the questions on SEZ and expires of FY '24, the 1.1 million square feet of the 2.4 million expiries is SEZ. So in total, at the end of FY '24, pro forma basis, assuming there's no new leasing, we'll have about 4.5 million square feet of SEZ space and non-SEZ if you factor the new deliveries of 2.1 million and the 1.3 million of expiries, it will be 5.1 million. So roughly end of the year, we'll have half of our space, which is ready -- which is marketable 4.5 million as SEZ. Again, the global captives are not looking at SEZ simply because they are looking at ease of operations. They can pay higher rents. They are not looking at tax benefits, which most of them have anyways been phased out. So I think SEZ regulation amendment, which allows for partial de-notification is a key for the industry. And this is -- as an industry, we have been in several conversations with both the finance and the commerce ministry. And I think today, what's happening is even if I have a vacant space, the regulation do not allow me or permit us to do a partial floor-by-floor de-notification. So let's say, if I have 400,000 square feet block and 200,000 square feet is vacated by an IT services company, I can't de-notify that space and lease it to a global captive. The regulation only permits a full building de-notification and that's the challenge. And anything which is partial SEZ and partial non-SEZ is not permitted. So what we're doing in our portfolio is 3 things. And of course, we are continuing the advocacy and our efforts with the regulators to ensure there is an amendment bill which helps us de-notify on a partial slow-by-slow basis. Apart from that, all our new development, Mohit, are planned as non-SEZ. So all are new development, the 7.3 million square feet, which excludes the -- the pre-commitment to ANZ, which they wanted SEZ is all non-SEZ. So there's no issue on our pre-commitment marketability and activity. 2, obviously, all our non-SEZ spaces, we are actively marketing, and we've seen pretty good results on that. You've seen it in the numbers. Third, what we're doing is building which are partially vacant or are going to get vacated, we are trying to explore if we can relocate some of those occupiers into other blocks and generate or engineer a fully vacant block and try to get that, then SEZ de-notified. And actually, we are in the process of that for a 400,000 square feet building vacated by a legacy lease by an IT services company. This is Block D3 Manyata, which is in advanced stages. So I think we'll just have to be patient till the regulatory clarity comes in. Definitely, this is a challenge. Having said that, I would just want to highlight a wrap up on this point saying that we still would have about 3 million square feet of existing non-SEZ spaces by the end of March 2024, including the current vacancies and expiries for this year and 2.1 million square feet of new deliveries, the M3 Block, the T1 Block in Oxygen and also the Embassy Hub block, which can also -- which is also non-SEZ. So we still have 5 million square feet to offer. But whatever is SEZ, it's just pretty hard to build a pipeline on that.

Just couple of follow-up questions on this. So firstly, on this government, but you said that you've been advocating this, but I just wanted to understand, what's the issue here? So the government seems to be quick on reversing the tax bid that came in the budget. On this, it's been a while that you've been talking to the government. So if you could help us understand and how do you see this playing out in the longer run, because obviously, all the listed peers and a lot of commercial real estate is SEZ. So just your thoughts here?

Yes, Mohit. So I mean -- I think that's a fair question. And I think the simple answer -- a quick answer to that is this needs to be done. This needs to be done yesterday by the government. Now what happened is the industry asks is 2 things, which is, 1, coexistence of SEZ and non-SEZ occupiers in the same building, which what I mentioned is slow-by-slow de-notification. And second, the request of the ask is an enabling regulatory framework which simplifies the process. Simply put, single window clearance and deemed permission. Whereas today, we have to follow a 4 or 5 month -- 3 or 4-month process. And only after approval we can kind of go back and market that space. So I think what's happening at the government end is there have been several discussions between the finance and the commerce ministries. And these are not -- we are not the only ones privy to this, but it's been in the paper, is that they were not in sync on the way forward on this earlier. Having said that, Commerce Ministry has not taken it upon itself to figure out a holistic way forward. We understand that they're in the process of drafting an amendment, and I don't think it will be DESH. It will be just an SEZ amendment regulation, which will allow slow-by-slow, maybe all the asks of the industry, including a single-window clearance and deemed permission may not be factored in, but the floor-by-floor just needs to happen, and they're fully supportive of that. So I think my personal estimate, I have no inside view. It is a quarter or 2 away, but many of the others in the industry, I'm hopeful for even faster turnaround. I think it's going to take 2 quarters. That's my personal view.

Yes, let me just jump in Mohit. I think Vikaash is right. And it's a bit difficult to draw parallels with tax ask. I think the 2 very different things in the tax ask. When it came out in the budget, certainly had an impact on our -- the industry stock price, and we have to really sort of make sure that we represented that. And that was really very urgent ask because of the budget getting tabled and we passed into act. But I think at this point in time, we've made the -- we've represented that this is important. It is critical across the industry. And particularly as we go into sort of a cycle, like I said and there are GCCs coming in, the demand for the space is non-SEZ at this point. So yes, we're hoping that with the confluence of everything happening midyear from India's taking on this whole G20 position and -- the Commerce Ministry sort of syncing up, that it might be a quarter or 2 away.

Just to close this question, Mohit, on a positive note and a lighter note, we just successfully completed the de-notification of the 9 lakh square feet, Hudson and Ganges in TechZone. So hopefully, more coming soon.

Great. And just last follow-up on the Manyata, you mentioned that 1 million square feet expiry incrementally and there's M3 Block, 1 million. So with the existing vacancy and this 2 million -- 1 million new supply and 1 million expiry, how do you look at Manyata leasing over FY '24?

Yes. So again, this is my favorite question, Mohit, because I think Manyata contributes 1/3 of the REIT. NOIs 1/3 of the REIT size, and we are all super excited on Manyata. It has seen some churn, and it has seen some transition happening. So let me break it down to 2 pieces. One, this year, we started with vacancy Manyata of 1.4 million square feet. Excluding the pre-commitment on the existing available area, we have leased about 1.1 million square feet in Manyata. And we saw an exit -- we saw exits of 0.9 million square feet. So net-net, we ended the year in Manyata vacancy of 1.3 million square feet, right? Additionally, we have guided to an additional 1.3 million square feet of expiries. Not all of these will be exits, but let's say, on a pro forma basis, we have a marketable space of 2.6 million square feet in Manyata as of the end of March 2024. Now 2 things. One, last year, if you see our net leasing has been positive in Manyata. Manyata spreads have been pretty impressive, around 20-ish percentage, all the exits that happened last year and also this year are phenomenal mark-to-market simply because the legacy IT occupier space, we had much below market rent. We also added, Mohit, 18 new high growth occupiers in Manyata last year and we continue to see that momentum, especially since the Hilton Hotels we launched and also the BTO, the Back to Office picked up. So if you were to ask me, we are pretty positive on Manyata. We are very, very excited and that is the reason we have not only demolishing an existing building in D1 and D2 and redeveloping and I can -- in my memory, this is the largest scale, 1.2 million square feet I can recollect in office segment, redevelopment of an existing building. And we've also launched L4, which is a new early-stage block, 0.8 million square feet apart from M3 Block A and Block B, which totals 1.6 million. So we have activated almost everything that we have in Manyata, which could be constructed. So that should just give you comfort and also flavor on how we see Manyata. In terms of pipeline, on the under construction area, which is M3, we are discussing with a global captive cloud infrastructure company, and that's at advanced stages. This is for 275,000 square feet, a leading Australian bank where we've already pre-committed a large chunk in M3 Block B. They want to exercise their growth option for another 135,000 square feet. And we also have another 65,000 square feet of early discussions, which takes advanced discussions in the under construction portion of Manyata to 500,000 square feet. On the completed portion, we have about 300,000 square feet in advanced discussions. This 300,000 out of 800,000 square feet that Ritwik mentioned in his prepared remarks. And just to give you a flavor on that, there's a leading Top-20 U.S. healthcare company, which is looking for 150,000 square feet. We have a U.S. insurer and investment manager, the first time in India that's looking at 100,000 square feet. We have again, another U.S. insurance made an existing customer in Manyata to looking to expand 50,000 square feet, and there are a couple of others, including a Swiss instrumentation engineering company. So I think we are very positive. Yes, Manyata will see some churn. There will be some 1 million square feet additional expiries that we mentioned, simply because the earlier IT services occupiers, most of it is SEZ. We'll continue to see them move out. There's healthy mark-to-market and we'll see these large global banks, captives come in. So we are net-net positive, and we think we see acceleration of demand on larger-size deals towards the second half of this year. And in the meantime, the mid and the small size deals will continue.

We take the next question from the line of Saurabh from JPMorgan.

So congratulations Vikaash and Aravind for opportunity. But okay I have 2 questions. One is on the tax, so in terms of the -- years before your -- the unit capital runs down. So the understanding is fair that you have INR 28,000 crores of unit capital left, which can be used for the capital reduction. And out of that, the run rate currently, which will be about INR 800 odd crores. Is that understanding correct?

The understanding is correct.

That's correct, Saurabh.

Okay, good. The second is, on the NDCF walk down, there's a working capital release of approximately INR 110-odd crores. Could you quantify as to what is that?

Saurabh, generally, our working capital has [ without rentals ], security deposits, and there are other general items which are trade receivables, trade payable and any one-off item. So for this quarter, if you look at our working capital, total is around INR 114 crores, out of which the major is INR 80 crores, which are receivables of the previous 2, 3 quarters, which has been received in the current quarter. The balance is without rentals of INR 13 crores, INR 14 crores and others are SD and trade receivables.

And this is -- I mean, so this is -- I'm just trying to guess as to the predictability of this line. So this should not -- I mean, because you have some blocks coming up the next year also. So how should we think about this line?

Saurabh what happens is, generally, we look at this working capital component year-on-year, because quarter-on-quarter, there may be some timing differences of the -- like in this current quarter, it looks a bit lopsided, because there are a couple of receivables -- trade receivables in the receivables of the previous 2, 3 quarters, which came in this current year. The way I would -- or the management sees working capital is year-on-year basis. If you see during the current year, we have somewhere around INR 254 crores of working capital for the full year. You can -- and this is largely coming because of the security deposit, which is coming out of the 5.1 million square feet leasing that we have done during the current year. So that is the major driver. So going forward, I think you should look at this as a stabilized basis, only mover is a leasing. If the leasing happens similar, this similar number would come in.

So Saurabh what Abhishek is saying in other words, is that if we see exits, let's say, the expiries that we have indicated and if there is a time lag on backfilling that space, because we refurbish the space or we just take time to fill up the entire one, so there will be a negative drag to that extent on this working capital, because we'll have to refund the security deposits. But the inflow of our security deposit at higher numbers, higher rents may take whatever, 2, 6 or like 8 months. So that's just the difference.

Okay. And just one last question, so your gross leasing has kind of improved this year, but you're also seeing expiries. And it seems to me that the expiries are weighted towards the SEZ piece. So how should we think about when should your expiry momentum kind of come down? And at a portfolio basis, will this understanding be correct that the SEZ, non-SEZ mix is about 50-50 as we speak?

So Saurabh, why don't I take the first one, while we pull the data for the second. So first one, Saurabh again, hard to predict. It's -- some churn is business as usual. But I would say we've done with a large chunk of the IT services and SEZ, both of these combination of this set, we've done with a large chunk of those occupiers who are either consolidating, doing a corporate housekeeping or just pruning down space. Again, most of it is in Manyata. All the other parks usually have new age occupiers. So Manyata is the one which has seen over the last 2 or 3 years, a lot of churn in terms of a lot of positive churn, I would say, in terms of occupied. I think FY '24 would be the year of consolidation in that sense. So hopefully post that, we'll be a little more stabilized state of affairs. Again, if you -- on a question on SEZ and non-SEZ, the portfolio today would be around 60-40 in terms of SEZ, non-SEZ. But if you look at it from a -- including the development portion, then it evens with spread of 50-50.

Okay. And I know you gave the number for next year, the 1.5 million, which is SEZ. What is the number for 2 years, you have it or I can take it offline, what is total?

Yes, yes, we have that. Just give us 30 seconds. So the next 2 years, FY '25, we have indicated total expiry sort of 1.8 million square feet. 1.5 million of that is SEZ at 63% mark-to-market and 0.3 million is non-SEZ at 2% mark-to-market. So that's in FY '25. We'll also share this offline with you if it's too much of data points. But FY '26, we've indicated 2.2 million square feet total expiries. So 1.3 million square feet of that is SEZ at 52% mark-to-market. And 0.9 million square feet is non-SEZ and 7% mark-to-market. So clearly and I have the numbers for '27 as well. But clearly Saurabh if you look at it, the large chunk of this is SEZ expiries. And these are the expiries which are the highest mark-to-market, 63% in FY '25, and '26, 1.3 million. And majority of them, my guess would be is in Manyata.

Yes just -- I mean, if you look at the supplemental data book as well, we actually put this out. We don't break that out SEZ and non-SEZ. But I think if you look at -- and Vikaash is right, you're looking at Manyata. And I'll just give an example, right? In FY '26 if you're looking at roughly 2.2 million, if you're looking at 1.7 million square feet of expiries, Manyata the mark-to-market opportunity there is around 89%, right? So if you just think about sort of the quality and why we are sort of doing the development we are at Manyata right now is to effectively make it ETV or GolfLinks, just new age, next-gen that are running at 3% vacancy right now. So completely -- we're pretty comfortable with that.

Okay. So basically, then [ the company notification ] to that extent is then super important to you, because the expiries are largely geared towards SEZ. So that should be...?

Saurabh, in general, yes. However, the good news is that we have got new delivery of M3 Block A 1 million square feet, of which we have visibility and have committed to around, let's say, 50%. So we still have some product to offer, already usable non-SEZ space. But the more this get delayed, the more problem of marketability of non-SEZ -- contiguous available chunk becomes a challenge. So I think until now, we are still okay. Obviously, it impacted. We would have done even better this year. But if this gets delayed, let's say, beyond a quarter or 2, it's going to definitely impact the marketability available offerings for marketing reasons.

We take the next question from the line of Pulkit Patni from Goldman Sachs.

Congratulations Aravind and good luck Vikaash sir, for future endeavors. Just one question left. If you look at the leases that you've signed this year, clearly, they are much smaller, and you mentioned also, I think it's about 40,000 on average. Does the nature of agreement change, do these kind of tenants require different rent free periods, et cetera? If you could just talk about how these smaller square feet leases are compared to the large ones that you typically sign?

Yes. Thanks, Pulkit. Thanks for your wishes. And on the question, I think you're absolutely right, the deal sizes are narrowing simply because the large RFPs, while they are actively being discussed, there is caution on CapEx spend at headquarter levels globally. And hence, the decision making is taking time, which is what we hope that gets accelerated in the second half of this year. And this is a little bit of a consensus view amongst the industry experts who are kind of discussing this with the occupiers. So the focus today remains small and medium-sized deals. We're pretty happy with that. It's a lot more hard work for the team, but it embeds a lot of growth into the portfolio. So I'll tell you why these are not small occupiers. These are not start-ups, just because the deal size is a 40,000 or 25,000 these are not start-up. We are talking about some of the Fortune 500 companies who are taking 30,000, 40,000 square feet, simply because they want to tip the toe in the water in India and then start expanding. Clearly, that's what has happened with let's say, an Australian bank who started very small in Manyata and now looking in the market for 1.2 million square feet RFP just within 3 years starting from 40,000 square feet. So I think these are large companies we are speaking about. We think the deal sizes are small because it's tough to get CapEx spend approvals from headquarters and take large calls, everybody figuring it out on the macro volatility front. We are more than happy to have them in the portfolio, because we know they will grow. And in fact -- these are interesting statistic Pulkit. Of the 44 new high growth occupiers across 1 million square feet new leasing that we added in FY '23, almost half of them are already looking to grow the India footprint, which will further aid are leasing. So I think this trend will continue. In terms of what are the -- is there any difference from the lease terms, I think they are absolutely consistent. Only 2 differences. One, we get even more premium rents, because these are captive centers they're willing to pay extra rent. We do not fund the TIs or fit-outs unless it's a global company. So that's not a trend that we are doing more and more fit-out financing. We don't do that. We do it on an exceptional basis. However, interestingly, while they're taking 30,000, 40,000, 50,000 square feet, they increasingly ask us to have a growth option clause in the contract where they can grow into contiguous floors with a time period of 3 to 6 to 12 months. So that just kind of goes to show they're tentative, they're waiting for approvals, but they definitely see business growing. So I think it's a good trend. We continue to get more premium rent and we embed more number of occupiers diversify the base. And hopefully, even half of them grows 3x, it really helps our portfolio.

We'll take our next question from the line of Kunal Lakhan from CLSA.

Thank you, Vikaash, for your contribution so far, and wish you all the best for your future endeavors, and also welcome back Aravind. All best wishes for you too. My question is actually on the guidance side again. So Vikaash, you did highlight that by the year-end, you are expecting 4.5 million square feet of SEZ vacant space. If you build that in and then of course, like there is contractual escalations on 6.7 million square feet and then the interest repricing that you are expecting. Is it that difficult to actually put out a number in terms of guidance? And if not the exact number, at least directionally, can you just point us out, that is distributions in FY '24 would be lower or higher than FY '23?

Yes, thank you, Kunal, for the wishes and the question. So I'll tell you -- 2 or 3 things. I may be repeating some stuff, but I know one, we've already delivered on the guidance we've laid out. It's a tough macro environment out there, Kunal. It's not about India office or about what other factors that we control. I can easily tell you that we have exceeded the leasing guidance we gave this year by an even higher margin than we did comfortably at least of a double-digit margin, but just the signing is got pushed out. So that's kind of an environment where we have visibility, there's handshakes or there are advance discussions, but just corporates are not willing to sign. So that's one. So very hard to estimate what the time lines on those would be and the variability can be pretty huge, right? Let's say, an occupier of 700,000 square feet in Manyata vacates in November and the new guys, even if we have a handshake, but only signs in April of 2024. So suddenly -- in 2025. So suddenly for '24, you have a huge gap, not only on the rental gap for those 3, 4 months, but also a large chunk of security deposit easily INR 100 crores and INR 150 crores. So from a management perspective, I think it's more prudent to kind of have more clarity on that. Second, this was pointed out earlier by Mohit, that SEZ, I mean this is something we just don't control. And today, if you see just today and we were discussing this earlier internally. On the SEZ front, we just have 1.6 million square feet of non-SEZ existing operating space. If you take out Hudson and Ganges, which just got de-notified in Pune, given it's slow, so we just take that 800,000 square feet out, we have already leased 100,000 there. So that makes it about just 8 lakh square feet. So we have a portfolio of a scale of 45 million square feet with about 35 million, 36 million square feet operating and with a headline available vacant space is 5.5 million square feet. I just have 800,000 square feet to market. Now in this context, we just think it's more prudent to wait for clarity on more of these things to emerge, but we have laid out all the building blocks on how this will pan out. And on the interest rate, maybe I can give you more flavor on that. So while Abhishek mentioned on the interest rates, both the buildings get completed, and there will be interest cost, which -- was getting capitalized, flow into the P&L and hence impact the distributions a bit. This is both for Hudson and Ganges, 0.9 million last year and 2.1 million square feet, which will get delivered this year. Apart from that, I can just say that based on the current market rates, the broad estimate, we think the overall in place debt cost, right, both concerning the fixed coupon, which comes up for repricing as well as the floating and all the factors that Abhishek mentioned. The interest rate average rate will increase by about 90 to 100 basis points in place on the overall debt. So I think that may help on modeling the interest cost. But I think the others we would just like to -- we think it's a little early to take that call. We'll continue to evaluate the situation, revisit in a couple of quarters. Is that clear?

Yes, and let me just kind of reiterate on that, right? We've hit guidance. We've -- in top markets we've been faced with -- I mean whether it's the interest rate environment, whether it's a pandemic. I mean I think you've got to keep it in perspective that again, we delivered close to $1 billion in distributions, right? And that's ultimately always sort of our goal to make sure that our unitholders are obviously getting as much cash in hand as possible. And then hopefully, we can do the growth upside on top of that. So rest assured, we're keeping an eye on it, and hopefully, we'll come back to you.

And Kunal, I know that we've mentioned this before, and I understand that focus on the quarter results and the year results. But really, if you look at it, the way we did it, the way we ran it, the way we mentioned and communicated, we are running this for the long-term. We are taking the hard calls. Letting a 2 million square feet occupied Manyata go in the middle of Delta variant during COVID and hitting that occupancy where we would have been comfortably sitting in 92%, 93% compared to all the other REITs who are in the early 80s, would have been an easy call to take. But we took the call to let them go, because they're not ready to pay the rents. We took the call to demolish one of those buildings and do a 1.2 million square feet utilizing the extra FAR, realizing a 22%, 25% yield on cost and de-notifying other block and re-leasing it at premium to market trends and at healthy 25, 30 basis points, healthy 25% to 30% re-leasing spread. So I think, I just think in the overall context, we want to continue to focus on creating value doing the right things. And as and when the market situation changes in the 2 or 3 aspects on interest rates on SEZ and the overall global macro changes, we'll take a call on guidance.

Ladies and gentlemen, due to time constraint, we take the last question from the line of Neel Mehta from Investec Capital.

Best wishes to you Vikaash on the new innings and congrats Aravind on taking over. Just 2, 3 questions from my side. Firstly, on the future MTM opportunity in our portfolio, right? So except for Bangalore, where you've stated that there's 25% MTM opportunity -- the same metric for other cities [indiscernible], right? So what could be the reason for this? So will we have any ability to charge slightly higher than market trends there or is the decline inevitable? That's my first question? And second is…

I'm sorry to interrupt, Mr. Mehta. You'll have to speak a little close to your mic and speak a little slower, sir. Your audio is not very clear.

Is it better now?

No, it is not. Please use the handset, if possible.

Yes. Is it better now?

Much better. Please go ahead.

Yes. So what I was asking was the future MTM opportunity in our portfolio, we've stated that except for Bangalore -- for all the other cities, it's being showing negative, right? So what is the reason for this? Would we have any ability to charge slightly higher than market trends or is the decline going to be inevitable in these geographies? That's the first question? And the second one is of the 5 million square feet leasing that we did during FY '23, how much was it in SEZ?

Yes, Neel, thank you for both the questions. So on the first one, I just guide you to Slide 43 of our earnings deck, which has the mark-to-market potential on all of our markets. And it's not true that there's no positive mark-to-market opportunity except for Bangalore. Yet Pune, one of the assets because the existing in-place rents are higher than what we expect market to be negative. So on an overall basis, the market, you're right, is negative. Mumbai, I think it's marginal. And again, this is an assessment. Again, Noida is marginally positive. I think it all depends on how the markets pan out in terms of way forward, both on the SEZ, on the back to work and also the captives. In general, I would say Bangalore has a higher propensity to attract more sophisticated occupiers and hence, higher mark-to-market. Also, Neel please note that Bangalore also has higher mark-to-market because Bangalore is the core market for us where we have parks like Manyata and GolfLinks existing since 2005. And hence, the in-place rents on some of the leases are really of 2005, 2010 vintage leases. So that's the reason you would see a much higher mark-to-market in Bangalore. In general, we have leased on an overall basis, the entire of -- leasing that we did this year at a premium to these markets. Again, the premium would be low single digits, but still it's a premium to the market trend that CBRE estimates, which already factors the premium for our properties. So I hope that answers your question. But in general, we would look to do a higher mark-to-market but Bangalore because of just the legacy leases as well as really strong market, you see very healthy mark-to-market. And in terms of your second question out of the 5.1 million square feet, SEZ was interestingly about 40% because that includes renewals as well. So just on new lease basis, we have done only 0.6 million square feet of the 5.1 million, which is SEZ, and we've done 1 million square feet renewed. So the split of the 1.6 million SEZ that we've done out of 5.1 million is 0.6 million new leases and 1 million square feet renewals, if that helps.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would now like to hand the conference back over to Mr. Abhishek Agarwal, Head of Investor Relations, for closing comments. Over to you, sir.

Thank you so much for joining us on today's call and for your great questions. Most of the data points covered today can be found on our website and in the published materials, and we are always happy to engage further if any additional clarifications are required. Thank you so much.

Thank you. Ladies and gentlemen, on behalf of Embassy Office Parks REIT, that concludes this conference. Thank you for joining with us. You may now disconnect your lines.