Mindspace Business Parks REIT (MINDSPACE.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '26 Earnings Conference Call of Mindspace Business Parks REIT. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Govardhan Gedela, Head, Corporate Finance. Thank you, and over to you, sir.

Good evening, everyone, and thank you for joining the earnings call for quarter 2 financial year '26 of Mindspace Business Parks REIT. At this point, we would like to highlight that the management may make certain statements that may be forward-looking in nature. Please be advised that our actual results may differ materially from these statements. We do not guarantee these statements or results and are not obliged to update them at any point of time. I would now like to welcome our CEO and MD, Mr. Ramesh Nair; and CFO, Ms. Preeti Chheda, who will take you through the business update and the financial performance during this quarter. We'll then open the call to a round of Q&A. And I'll now hand over the call to Ramesh.

Thanks, Govardhan. Good evening, everyone, and thank you for joining us on this call today. I'm pleased to report another strong quarter for Mindspace REIT. I'm delighted to share that in August this year, Mindspace REIT has completed 5 successful years of listing. This also marks the completion of 2 years of my tenure at Mindspace REIT. Over the last 2 years, we have delivered a strong and consistent performance. Unit price has risen from INR 315 in September 2023 to INR 455 at the end of September 2025, and annualized total returns of nearly 26% till 30th September 2025, in the last 2 years. Net operating income has gone up to INR 491 crores -- from INR 491 crores to INR 634 crores, again, highlighting steady growth. GAV, again, has increased from INR 28,700 crores to INR 41,000 crores. Distributions, again, has gone up from INR 284 crores to INR 355 crores as of this quarter. Over the last 2 years, we have delivered sustainable growth, operational efficiency and strong unitholder returns. We have definitely benefited from the favorable trends in Indian commercial real estate. Our performance shows our ability to capitalize on this positive trend and grow. We are sitting on significant firepower to capture India's office growth story. We know acquisitions and development are our twin growth engines. Our balance sheet strength gives us the flexibility and optionality. We want our business to be predictable, and we understand that steady execution keeps all of you happy. Let me start with an overview and outlook of the industry. A major milestone for the sector has been SEBI's reclassification of REITs as equity instruments. This further enhances flows from equity mutual funds and potential domestic index inclusions. This reform aligns India with global practices, deepening liquidity and broadening investor participation. Mindspace REIT welcomes this game-changing measure by SEBI. This reaffirms the government and SEBI's commitment to a vibrant Indian REIT ecosystem. India's office market remains resilient amidst global macro uncertainty. Flight to quality is real, and we are trying to be that quality. I would now like to share some highlights from the various IPC reports, which have come in the last 1 month. JLL reported that the India's office market hit a record 40 million square feet of net absorption in the first 9 months of 2025. This marks a 28.4% year-on-year growth. The third quarter alone was the strongest of the year with 15.76 million square feet of net absorption, up nearly 40%. Vacancy levels again has dropped by 40 basis points to 15.7%, marking the lowest level in 17 quarters. The CBRE report stated that the gross leasing surged to nearly 60 million square feet in the first 9 months of 2025, marking the highest level on record for that period. Hyderabad and Pune recorded the highest leasing to supply ratios, showing balanced growth with minimal vacancy risk. Also, the CBRE stated that Navi Mumbai remains attractive due to availability of Grade A stock and the relative cost advantages compared to other areas in Mumbai. A recent Cushman & Wakefield reports stated that Navi Mumbai has strengthened its role in MMR. 23.7 million square feet of Grade A stock, which constitutes around 20% of MMR's total stock of 120 million square feet, 87% of this is occupied. Average quoted rentals of INR 70, which is 57% lower than prime MMR submarkets. [indiscernible] and the Navi Mumbai International Airport are all helping in this. Infra upgrades, cost-effective supply and deep talent are drawing occupiers towards Navi Mumbai. The report also stated that Navi Mumbai's integrated and scalable urban framework is perfectly positioned to absorb the next wave of real estate growth. Now let's look at Mindspace REIT's performance. The key announcements for quarter 2 FY '26 include: we delivered a very strong gross leasing of 0.8 million square feet this quarter. Our portfolio's committed occupancy increased to 94.6% on a like-to-like basis. Including the recent Q City -- acquisition of Q City, which we acquired around 3 months back, which is now rebranded as the Square 110 Financial District, our committed occupancy stands at 93.8%. This is the highest since listing. Our NOI in Q2 grew by 25.9% year-on-year to INR 634 crores. This is again the highest growth since listing. We delivered a strong distribution growth for the quarter at 16.3% year-on-year. DPU growth again was 13.2% year-on-year to INR 5.83 per unit. 5 out of our 11 assets have a committed occupancy of 100%. Two more parks have 98% plus occupancy. Since the demarcation guidelines came out in December 2023, very happy to report that we have demarcated 2.65 million square feet. And out of this 2.65 million square feet, we have leased nearly 2 million square feet. Airoli West occupancy has increased from 72% to 94%. This reaffirms our belief in Navi Mumbai's growth story and the strength of our collective vision. The overall occupancy in Airoli also went up from 76% to 87%. Lease rentals have grown with new deals are happening at INR 70 in Airoli. Our focus now lies in reducing vacancy in Airoli East. Mindspace Fusion, our F&B hub, saw outlets like Starbucks, Pop Tate, Pizza Express opened last quarter, along with Crossroad Bookstore. 22 new F&B and retail outlets will help further increase our occupancy in Airoli East. As a public-facing retail destination, this will also bring new energy to the park. We are awaiting one final approval to begin development of the Hyatt Regency Hotel within our Airoli East campus. With ongoing upgrades, Airoli East will become an even more attractive destination for marquee occupiers. Let's now look at the operating and growth highlights. Pre-leasing spread, again, was a very impressive 28.1% for this quarter. We also delivered robust growth in rentals across our micro markets, especially Madhapur, Hyderabad. We signed the first deal at INR 100 per square feet in this market. This showcases our mark-to-market potential in Madhapur. A global health care giant vacated the space at INR 40, and we leased that to a Flex player at INR 99. An IT services client renewed their lease [indiscernible]. A global health care giant vacated the space at INR 40, and we leased the same place to a Flex player at INR 99. An IT services client renewed their lease at INR 95 after the term ended at INR 72. In Airoli West, a global fintech company, which vacated the space at INR 61, and we leased it to a green logistics company at INR 72. We are actively working on under construction pipeline of around 3.7 million square feet. We clocked a healthy NOI income growth of 25.8% as mentioned before, to INR 634 crores. We have also seen a 25% year-on-year growth in H1 to INR 1,250 crores. Our loan-to-value still remains low at 24.2%, and this demonstrates good balance sheet strength. Our GMV of our portfolio today stands at INR 41,000 crores. We declared distribution of INR 355 crores for Q2 FY '26. We have cumulatively distributed since listing INR 5,952 crores. In terms of portfolio growth, as you are aware, strengthening our portfolio through strategic acquisitions remains a priority. Over the last 9 months, we have grown our completed portfolio size by over 4.2 million square feet. This is through a judicious mix of organic and inorganic growth strategies. Organically, we successfully constructed and leased 1.3 million square feet, mainly the R2 building in Pune and the DC building in Mumbai. Our inorganic growth strategy included acquisition of a sponsor ROFO of 1.8 million square feet, a large external third-party acquisition of 0.8 million square feet and consolidation within our parks of around 300,000 square feet. Going forward, we would like to be more focused on acquisitions, which augur well with our portfolio to stimulate growth. Our platform is built to scale, and we continue to focus on acquiring high-quality assets in core markets. On each of our projects, at Mindspace Airoli East, we launched Mindspace Fusion, like I mentioned earlier, and is already [indiscernible]. We're elevating the retail and F&B choices across all our parks. Barbecue Nation Game Branch flurries are also opening this month. Upgrades have begun in buildings B1, B9, B10, B11 and B12 in Airoli East. We are refreshing [indiscernible] lobbies, landscaping, facades to current design benchmarks. The clubhouse again is at a design phase for the plant enhancements. Podium and terrace level sports and recreation are underway to boost tenant engagement. Continuous park upgrades and redevelopments keep our assets future ready. At Mindspace Airoli East, buildings B2 and B3, along with the central food court are slated for an upgrade. The project is currently in the design phase. We already have 2 data centers operational. The next 3 will go live in a phased rollout. Mindspace is the only REIT with a sizable data center portfolio. Upon completion, the portfolio will house 1.7 million square feet of data center space. Our early move into data centers positions us uniquely in the intersection of real estate and digital infrastructure. At Mindspace Madhapur, within our 10 million square feet park, current vacancy stands only at 198,000 square feet. Like I mentioned earlier, with Madhapur rents rising, for the first time, we touched INR 100. The Pearl Club, which we used to previously call the Experience Center, is on track for Q4 FY '26 completion. Building redevelopments are underway. B1 is 100% pre-leased and ready for handover in Q1 FY '27. B8 is slated for Q4 FY '27. We are seeing very strong inquiry and expect to close many prospects soon. Face enhancements continue with emphasis on infrastructure and ambience. In a hybrid world, tenants are gravitating towards best-in-class campuses, and we are truly leading the shift in Hyderabad. At Gera Commerzone Kharadi, Rewipe, our multipurpose amenity center that has launched last quarter is receiving great response. Uptake is strong and our tenants use the spaces very regularly. Fit-outs are in full swing at the R2 building following its delivery to our GCC clients and rents have commenced last month. At Commerzone Yevada, upgrades are focused on creating a livelier, more immersive campus experience. B7 is undergoing a phased lobby refresh. Work is progressing as per schedule. Facade and lobby upgrades are being planned. Building B1 is set for enhancements, including a new food court lobby and facade upgrades. Plans are again underway for terrace amenities to revitalize the central -- and to revitalize the central recreation garden. On customer centricity, we always prioritize our clients, their feedback and requirements. We advanced our H23 program, which are 23 measures to bring a hotel-like experience in our park. Lobbies are being reimagined with 5-star hospitality wide. We offer vibrant breakout zones, indoor games, music corners, cafe seating. Amenity is being strengthened with more offerings at food courts, terrace activations, clubhouses and covered walkways. These come together for a smoother, richer campus experience. Elevator upgrades are underway based on life cycle assessment findings. We conducted 16 B2C events across 6 parks, drawing thousands of employees. We continue to remain focused on our portfolio upgrades. The playbook is very simple: build, lease and upgrade endlessly. The goal being to lift rentals while enhancing day-to-day experience for occupiers. We are channelizing CapEx into asset modernization to strengthen stickiness and renewals. Priorities have shared by voices on the ground. They're doing a lot more surveys, audits and continuous tenant opinions. All these initiatives will help us attract quality of tenants and also to keep quality tenants. I'd like to highlight here that tenant quality also drives value of the parks, not just the location. Our investor narrative is very simple and consistent, quality occupiers, disciplined growth and stable returns. On the ESG front, this quarter, in GRES 2025, we retained a global sector leader status in the office listed development benchmark for the third straight year. We obtained BSE 5-star ratings for 11 assets across the portfolio. Renewable energy now contributes 50% of our energy requirements. Energy efficiency measures will help us meet our targets under sustainability-linked finance. In conclusion, let me address concerns that were highlighted over the last few quarters and how we have addressed them, basically concerns we have heard from all of you. Last quarter, global uncertainties from the West posed concerns, yet our performance reflects the business' strong resilience to global uncertainties. Navi Mumbai vacancy was the key concern. Mindspace Airoli West now stands at 94% occupancy and Mindspace Airoli East stands at 80%. Together our Mumbai occupancy in Navi Mumbai stands at 87%. Leasing SEZ space is also a challenge which we closely monitor. As mentioned earlier, 2 million square feet out of our 2.6 million square feet of NPA converted space is successfully leased. I also wanted to take this opportunity to highlight our new leadership team. Before I conclude, I wanted to share this that Venkat Neelakandan has joined us as Senior Vice President and Head, Asset and Facilities Management. In this role, Venkat will be the Head of Campus, our FM business vertical across our pan-India office portfolio. Venkat was previously the Global CRE Head of Capgemini. Srikanth Reddy has joined us as Senior Vice President and Head Leasing South. In this capacity, Srikanth will lead the leasing for South India. Srikanth was previously the Managing Director of Cushman & Wakefield. Both of them will be based out of Hyderabad, highlighting our focus on decentralized and strong regional leadership. In conclusion, India's commercial office market remains resilient backed by strong fundamentals. Growth is being driven both organically through developments and upgrades and inorganically through carefully selected value-accretive acquisitions. Our financial discipline remains unwavering with strong cash flows, low leverage and prudent capital management underpinning consistent growth. Our philosophy is simple and proven, lease rapidly, build efficiently, manage smartly and create workspaces that people love and businesses thrive in. We thank each of you, our analysts, for continued -- for your continued support and guidance that has helped us improve. At Mindspace REIT, we continue to build loved workspaces and maximizing value. Thank you all for your time. I'll now hand it over to Preeti for further financial updates of the quarter.

Thank you, Ramesh. Good afternoon, everyone. I'm pleased to present the financial results for the quarter ended September 30, 2025. Mindspace REIT continues to deliver healthy financial performance, aided by strong operating performance. Our NOI for Q2 FY '26 grew 25.8% Y-o-Y to INR 6.3 billion. Revenue from operations for Q2 FY '26 increased by 24.8% Y-o-Y to INR 7.8 billion. We recorded a healthy 16.3% Y-o-Y growth in distributions for Q2, totaling INR 3.5 billion. Our DPU grew 13.2% Y-o-Y to INR 5.83 per unit. The GAV of our portfolio grew about 12% to INR 410 billion as at September 2025. This strong growth was driven, amongst others, by rental increases across our micro markets, particularly Madhapur, Hyderabad, where the recent transactions have demonstrated a strong growth in rentals. NAV of our portfolio also grew by 12% from INR 431.7 per unit at March '25 to INR 483.7 per unit at September '25. I would like to highlight here that we have consistently added value to our existing portfolio through park enhancements, redevelopment, creating new spaces like Club in Hyderabad, High Street in Airoli East, diversification into data centers, adding newer buildings, which were not envisaged at the time of IPO and so on. All of these collectively, of course, coupled with strong operating performance, have contributed to our NAV per unit growing almost 50% from INR 326 per unit at the time of IPO to INR 483.7 now. Our LTV, as Ramesh mentioned, continues to remain low at 24.2% as of September '25. Like I had mentioned in the last quarter earnings call, we are working to convert some of the continuing variable cost debt, which is at our SPVs to fixed cost borrowings and also looking at longer tenures so that we can lock the lower coupons for a long term. With the rental growth at our parks, Airoli occupancy steadily increasing, our under construction portfolio progressing as per schedule, inorganic growth supported, of course, by conducive interest rate environment, we believe we are well poised for a healthy NOI and DPU growth going forward. With this, I hand over the call to the operator to open the floor for questions. Thank you, everyone.

[Operator Instructions] The first question is from the line of Karan Khanna from AMBIT Capital.

Just a couple of questions from my end. Firstly, if I look at Slide #11, Madhapur Tower 1A and 1B are already 100% pre-leased to a GCC. But what's the thought process regarding Tower 7 and 8, given it will near completion within the next 4 or 5 quarters? Are you in active discussions with potential tenants regarding pre-leasing of these towers? And as a follow-up, what sort of tenant profile and rentals will you be targeting for these towers?

Karan, great question. In my 26 years in commercial real estate, I have never seen such a vibrant market, what I'm seeing in Hyderabad at this moment. 1.5 years back, rentals were just around INR 75, INR 78. Today, everything is going between INR 95 and INR 100. We are very confident B7 and B8, which is 1.7 million square feet, which is expected to get ready by April 2027, will get pre-leased very soon. For this 1.7 million square feet, I was just checking with my leasing head, Srikanth, what's the amount of inquiries we have? We have close to [ 5.5 ] million square feet of inquiries already for this 1.7 million square feet. So very confident and very soon, we should be able to start giving good news. It's a big building. So we will at least have 4, 5 tenants here, but inquiry sizes ranging from 100,000 square feet right up to 800,000 square feet. We are in discussions with many, many global large GCCs for this building. Construction is on track. I was there last week, so on track to finish construction by April 2027.

Sure. This is helpful, Ramesh. Just my second question is relating to the overall thought process regarding third-party and sponsor acquisitions. Given your net debt remains in the comfortable range of sub -25%, will the focus be first towards completion of under construction and future pipeline of 3.7 million and 3-odd million square feet, respectively, before pursuing these opportunities? Are you -- or are you open to evaluating these opportunities at the right time? And as a follow-up, if you can also provide some current leasing status of some of the large sponsor assets, including in Jui Nagar and perhaps at Ultimus as well?

So a good amount of assets we are looking at right now. Definitely, the focus is not just on development assets, that continue whatever the 7.1 million square feet. We are a very execution-driven company. The key focus is on converting land to cash flows. That continues. But as we talk right now, we are looking at multiple third-party assets, multiple ROFO assets, 2, 3 very good ROFO assets. Altimus is something where the sponsor has seen very good amount of leasing traction, nearing 80% plus number. Ascent, again, a building which is close to Ultimus, again, it's something which -- again, these are sponsor assets at the right time, we would make offers for these, but good leasing traction. Given all the challenges today BKC is facing, demand is moving outside of BKC markets around that. So good traction in markets like Kali.

So just as a follow-up, we are also seeing a lot of activities in the Bangalore market with nearly all your peers now having a presence in the Bangalore market. So what's your thought process? Will you be actively evaluating opportunities here? Or would you look to go deeper in some of your existing markets where you have a large presence overall?

So we look closely at 2 assets in Bangalore. One, we were not the highest bidder, somebody outbidded us. The other one, there were huge traffic issues, so we gave it up. So these are the 2 assets.

Sure. And lastly, on exit occupancies, given the portfolio occupancy and committed occupancy is already at 89% and 92%, respectively, what is the exit occupancy guidance for FY '26? And if you can provide some color for FY '27 as well, that will be helpful.

We're looking at coming close to the 95% mark. That's what we had said at the beginning of the year and on track to come to the 95% mark at the end of this financial year.

And for FY '27, any internal targets that you'd like to share? Or is it too early to comment on that?

Next call, we should be able to give some guidance on that.

The next question is from the line of Mohit Agrawal from IIFL.

My first question is on your NAV increase. So last 2 times, the NAV increase has been in double digits. And if you look at over a year, the NAV is up 23%, almost [ INR 90 ]. Could you elaborate the reasons? And more than that, is it some kind of a reset that you're seeing? And if yes, then should we expect this to continue like next 6 months in March also, should we expect a double-digit kind of? So what is the color you can give on the NAV increase?

I'll give a couple of insights and then Preeti can add to it. So like I mentioned, Hyderabad market has just gone crazy in terms of rentals, in terms of demand. You saw that record land prices where land was sold at INR 170 crores an acre. This is the same land which [indiscernible] purchased at INR 30 lakhs an acre. I'll just repeat it, INR 30 lakhs an acre has today become INR 170 crores an acre. Obviously, rentals have gone through the roof. People have underwritten these INR 170 crores, INR 140 crore land deals at [ INR 130, INR 140 ] kind of rentals. So that's the first part. Over the years, what all commercial developers and REITs have done is efficiencies back 10 years, 12 years back used to be 78%, 77%. That's kind of dropped to a 70% mark in almost all parts of the country, except in places like BKC, where efficiency today is 60%, even lower. So efficiency adjustments is something which, again, we have done. So these are the 2 factors which has contributed to increased NAVs. Airoli, there's been increased rentals where you heard about me talking about Gigaplex occupancy going up. And these are some of the valuation assumptions, which the value has told us about.

If I can just add, so as Ramesh rightly mentioned, a big chunk of the growth between March '25 and September '25 has been attributable to Madhapur rentals. The valuer earlier had assumed INR 85 rent and is now reset it INR 95, which is where the deals are happening. In fact, they're happening even higher than that. So that has been one of the largest contributors to the valuation upside this time. But generally, to answer your questions in terms of how you all should be looking at valuation going forward. So as I had mentioned a while back, if you look at the way our NAV has grown almost 50% since IPO, of course, operating performance has been one of the largest contributors. But alongside that, we have continuously adding value to the portfolio, like redevelopments have added to our NAV. The newer leasing areas, which we've created, whether it be Pearl Club, High Street or even newer buildings, which we had not even envisaged at the time of IPO, our data centers, which have added value, now all of these have also contributed to our NAV. And these are certain things which we will continue to do going forward. So to again, sum up, one, of course, your strong operating performance, our rental growth across our parks, including Airoli, needless to talk about Hyderabad. That's going to add operating performance as we complete our developments on the 7 million square feet, that's going to add to the NAV. And of course, all the enhancements, redevelopments, newer buildings that we keep adding to our existing portfolio, all of them collectively should be able to contribute to a healthy NAV growth as well.

Sure. Understood, Preeti. So this INR 85 to INR 95 reset, now I think in the next round, do you expect this to kind of moderate it to low -- high single-digit, low double-digit number? Or where do you see this?

So it depends on where exactly Hyderabad rents move. If this rental growth continues for the next few quarters, years, I don't really know. Then accordingly, I'm expecting that the valuer will keep resetting the rentals.

There's absolutely no space available in this market. And that's what you saw those massive land deals happening at those INR 140 crores and INR 170 crores. So that's the game. And we -- I mentioned it earlier also, our rentals have already touched INR 100. And these are for some of our older buildings. And newer inquiries, we are confident we should be able to do it more than INR 105 kind of numbers.

Sure. Understood. My second question is, Ramesh, in your opening remarks, you sounded optimistic on Airoli East. And in answer to the previous question, you had mentioned you reiterated 95%. Now for that, obviously, the Airoli East occupancy has to move up meaningfully from that 80% mark. Where do you see this number? Let's say, any indicative specific target on Airoli East by end of FY '26?

So 4, 5 things, Mohit. First is there's not much of space left for us in Gigaplex. I mentioned occupancy has already touched 94%, which means we only have excess space in Airoli East. Some of our nearby parks, there were a couple of competing -- 3 competing parks. They're also seeing good traction. There's not much of space left. Everybody knows about these government initiatives in terms of Navi Mumbai. The airport is already a reality opening anytime soon. Everybody knows about Atamse2, there's multiple flyovers, tunnels, all that. Fusion, which is -- we got the idea from DLF Cyber Hub, that's a mini version of Cyber Hub, which we have created in iroli East, which again is something which is seeing a lot of traction. This is going to have 22 F&B outlets. You would have recently read about the Maharashtra GCC policy, which was announced by the government. This GCC policy is a mix of many good GCC policies across the country. So very proactive efforts by the [indiscernible] government. I think all these would lead to -- and people can't afford the kind of rentals today, let's say, JPMorgan in [indiscernible] or Morgan Stanley in Commerz III. Those kind of global captive back offices, very few companies can afford. So I think there is a clear opportunity given that rentals in Navi Mumbai are only INR 70. And I think it's a matter of time before you see a good amount of leasing happening. Almost all the top Indian banks like HDFC, Axis, IDFC, all of them -- ICICI, all of them have big global back offices in Navi Mumbai.

Sure. Just a couple of small clarifications. Is Fusion now completely up and running? And secondly, on hotel, you mentioned you'll be waiting for just the last approval. What is the revised completion time line for that?

So hotels from the time we get the approvals, that will be around 3 years to complete. We have 22 F&B outlets, of which we have leased 20. 5 have opened up, another 5 will open up this month. The balance fit-outs are happening, and we'll lease 2 in the next 30 days. So it's coming up well. You should try and visit, Mohit.

The next question is from the line of Yashish Gilanshi from BOB Capital Markets.

Despite record office absorption year-to-date, it seems like leasing momentum is slowing, at least for most office REITs, what do you think is causing this decline?

Leasing momentum for India, leasing momentum for Mindspace REIT?

For India and also for let's say Mindspace?

Not exactly, Ashish. This is a question. I have a small WhatsApp group of 10 commercial leaders, including IPC leadership and commercial real estate developers. I asked this question at least once a week or once a fortnight to them. I haven't heard any negative. There are 2 times I heard some amount of slow speed in decision-making. One was during April, during that liberation day tariffs time. Second was during that May time when the India-Pakistan war was happening. We are keeping a very, very close eye on this. No signs so far, but that's something we are tracking very much. Two things we track all the time on a fortnightly basis. One is tariff-related impact and the other is AI-related impact. Till now, no negative news. unless you have heard something, Yash, it will be good to hear your views on that.

Understood. Nothing specific and maybe take it offline and discuss this with you.

[indiscernible], I'll just add one point here. IT services definitely has slowed over the years in terms of portfolio also, you'll see it. But that's exactly the demand which is going to GCCs. So that's kind of the other day I was sitting with JPMorgan. They have 65,000 employees in India. Accenture today has 380,000 employees in India. So a lot of these guys are expanding the kind of -- I was shocked to hear that a new company in Hyderabad, a new company, this is the first entry into India, is taking 800,000 square feet in one shot, 800,000 square feet in one shot. Previously, 20 years back, a company would take 200 seats. Today, people are willing to bet on 5,000 to 6,000 seats in their entry strategy into India. So something we are tracking closely.

Okay. Understood. The details are very helpful. And what do you think is the stabilized occupancy level at the Square 110 Financial District? And how long do you think before the asset can reach that level? And also, what's the upside you see in the rents?

So Square is something which is 800,000 square feet. The vacancy levels in Square today is around 250,000 to 300,000 square feet. We are quite confident in the next 3 to 6 months we should be able to fill most of this space. And what's helping us in this filling up is absolutely no space being available in high-tech City Madhapur region because of which the demand is slowly shifting towards financial district. So companies want to be in Hyderabad. But if they don't get space in high-tech city, they would rather travel 20, 25 minutes, go to the other side of town and take space there. So that's what we are seeing. So in the next 6 months odd, we should be able to close a lot of the space. The inquiries are being quite [Audio Gap].

Okay. And is there...

Are you connected, sir?

Yes.

Sorry, not sure if you got my question.

Yes. So [indiscernible], in terms of Square vacancy, we're talking to multiple clients. There's a 50,000 square feet client. There's a 80,000 square feet client. There's a 30,000 square feet client. We're also talking to a large 200,000 square feet client. So if some of this close, I think we should be comfortable.

Okay. And lastly, as you evaluate opportunities to -- for acquiring assets, how do you describe the market as it stands today? And are there any challenges?

I think what we were seeing in terms of bidder spreads is slowly kind of narrowing as fund life of many companies kind of come to an end. There is obviously a little more pressure to sell. There is not too much of difference between cap rates, which are being quoted and which are getting closed. I think the number of buyers remains the same, 5, 6 buyers who are there. And given that we have local teams in many of these cities, our understanding of these assets, we do a lot of due diligence before we place offers, not just the Excel modeling, which we do. Yesterday, we were looking at an asset in South India. And there were a team of 25 people who spend the full day in the asset evaluating the overall asset. So from our licensing team to asset management team, to leasing teams, to engineering, planning, scheduling, all those upgrade teams all were at the site. So this is an art which we are perfect at now how to acquire third-party assets, and that continues.

The next question is from the line of Pritesh Sheth from Axis Capital.

First on, just continuing on the Square 110, we saw negative NOI and negative NDCF as well. At what occupancy do you think it breaks even? And by what time frame do you think that it will start being accretive to NOI, DPO, et cetera?

Sitesh, so this quarter, because it was an asset where a lot of work had to happen, of course, there's more work to do. But we, therefore, spent a decent amount of money this quarter on some urgent repairs investment be done. And that's the reason why you've seen negative NOI quarter. But going forward, of course, we have some upgrades which we want to do, which is going to be more in capital nature. So those are not going to hit our NOI or NDCF. Of course, some repair work will still continue, that will happen. But I think going forward, we should, I mean, in all possibilities, start seeing positive NOI and NDCF.

I'd just like to add here, Pritesh, that if you remember when we bought the asset, we had bought it at a cap rate of 9.9%. And the reason for that was it was a mix of a core plus and value-add kind of an opportunity where we could upgrade. And what Preeti just mentioned is the money which we are spending in immediate upgrades are also going to be medium-term upgrades we're going to be spending money.

Got it. Got it. Fair enough. That's helpful. And second, on Madhapur. So now we have opened one more block for development. I guess it was there earlier as well, but we are reporting it in the presentation probably for the first time. Just on the FSI potential in that park, how much we can go till in terms of FSI utilization? How much we have already utilized? And taking the density into consideration, what would be the optimum FSI potential that we would be looking at? And any other redevelopment opportunities in near term since we are close to delivering the 2 redevelopments that we have already taken up, any other redevelopment opportunities that you think of starting in near term?

So this is our B18 plot in Hyderabad. In a 110-acre campus, this is probably the most prime plot given that this is right in the entrance, main road facing. Here, the FSI potential is of leasable area around 530,000 square feet. We've just got approvals. This -- was previously, there was a small legal issue, which got sorted last year, post which we had accrued -- we had sent the files for approval. And this 530,000 square feet, we have started excavation work. This is going to be a mixed-use kind of development. And this is -- of the full park, so 10 million which is ready, 1.5 million square feet, which is B1, 1.7 million square feet, which is B8 and add another 530,000 square feet to that. So that's the total park as it stands today.

Any further potential to....

There is decent FSI potential. We've been doing some analysis on that. Given the size of the park, it all depends when some large tenants vacate, when we could get redevelopment opportunities. But one good thing is we have done 2 redevelopments there. So we understand that potential. And there are still many occupiers, many buildings there, which was done in the old FSI of 2. And as and when people [indiscernible] it, we could create a 6 and 7 kind of FSI there. So big opportunity. I don't want to put a number there, but the number is quite a decent number, which will keep us busy for the next few years. And similar redevelopment opportunities available even in Airoli, given that in all Indian cities, FSI, which used to be 2 around 12 years back, has gone to 5, 6, 7. So opportunities we are waiting for when tenants vacate to kickstart the plan. There are some places where we know the tenants could vacate and where we are getting ready with the plan, concept, designs, all that. So we should be able to do some announcements over the next couple of quarters.

Sure. Got it. And just on Airoli, right? I mean, till now, we have had largely the back office clients or tenants. With airport now in proximity, do you think there's a potential to also attract a front office clients leading to better rentals? Or we are still far away from thinking about that opportunity?

Front office is going to be a little difficult right now, given that there's a lot of front office demand in places like Worli and BKC and Kalina and all these kind of locations. Front office is going to be a little difficult, but good robust back office. mid-market demand would come in. Mid-market typically would go to areas like Air kind of market, some of that Kurla kind of market, those kind of demands could come to [indiscernible] front office, we haven't seen much of demand.

And with sort of with this mid-market demand, these tenants do have a potential to pay higher rentals or INR 75, INR 80 is what we should expect at the max?

So our focus, Pritesh, has always been occupancy over rent and high-quality tenants. The rentals in Navi Mumbai is something we marginally keep increasing every time we do a deal. So that's how we would like to take it. Given that there's a decent vacancy available in that market, we are not going to suddenly jump to INR 80. So every time we do a deal, we'll increase it by a couple.

The next question is from the line of Parvez Qazi from Nuvama Group.

Congrats on a great set of numbers. So a couple of questions from my side. When you refer to the additional 0.53 million square feet FSI potential in Madhapur, are you referring to the building 18 that we have there?

That's right. Building 18, the one in the front block.

Sure. Secondly, I mean, I know this question was asked earlier, but now given that we have largely 2 assets only where we can lease out additional space, financial district, you already said that you expect most of the space to get leased out over the next 6-odd months, which would then leave only Airoli East with us. Let's say, over the next 1 to 1.5 years, what is the kind of leasing that we can do in Airoli East? That's the first question. And second, what would be the occupancy in the SEZ versus non-SEZ space that we have?

Yes. SEZ versus non-SEZ, let me just find out what's the exact breakup. So like I mentioned, total 1.8 million square feet vacancy. In this SEZ is 1.3 million square feet. Our non-SEZ occupancy today stands at 96.2% and SEZ occupancy stands today at 91.8%. Airoli East, tough to put a number. There have been years where we've leased 1 million square feet. There have been years where we leased 0.5 million square feet. But demand is decent given that the inquiries are definitely increasing, and there's not much of space available. There was Tata Realty had done a good project close by that got taken by one client, 600,000 square feet. So now the next set of demand will start coming more towards our park. So in terms of newer spaces, there would be many opportunities. We are looking at at least 1, 2, 3, 4, 5, 6, 7, 8 different redevelopment opportunities across our portfolio over a period of time.

And also, Parvez, just to add to what Ramesh said, now actually, there's no distinction between SEC, non-SEZ spaces, because you are today within like 45 days able to convert SEC spaces into NPAs. So honestly, there is nothing like SEC, non-SEC anymore.

[Operator Instructions] As there are no further questions from the participants, with that, we conclude today's conference call. On behalf of Mindspace Business Parks REIT, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you, everyone.

Thank you.