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Mindspace REIT’s Ramesh Nair On AI Fears, Growth Plans And More
India's REIT market has evolved significantly over the years, with six REITs currently listed and more expected to hit the market. As the sector matures, investor awareness has increased, broadening the appeal of this hybrid financial instrument that combines features of both debt and equity.
K Raheja Corp-backed Mindspace Business Parks REIT, which was listed in 2020, recently reported its quarterly earnings and business updates. The trust has undertaken back-to-back acquisitions while recording growth in leasing activity and distributions per unit (DPU). Mindspace REIT has rapidly expanded its presence in Chennai over the past few months through a series of acquisitions, including the $321-million purchase of International Tech Park Chennai (ITP Chennai), Radial Road, from CapitaLand Investment in partnership with 360 ONE Asset.
VCCircle caught up with Ramesh Nair, managing director and chief executive officer of Mindpsace REIT, to discuss the trust's growth roadmap, the impact of geopolitical tensions on commercial real estate, and the opportunities and risks posed by AI. Edited excerpts:
You recently sealed back-to-back deals in the Chennai market. What was the rationale and what are your thoughts on the market?
Chennai has a vacancy rate of only 7%, half the national average (of 14-15%). There is also very little institutional-grade supply expected in Chennai over the next two years, giving us a strong runway for leasing, plus other supporting infrastructure in the vicinity.
Further, if one looks at the data, net absorption in Chennai has doubled from approximately 3 million square feet before Covid-19 to 6 million square feet currently. Within the South Indian market (which accounts for 60% of national demand), Chennai represents a 10% share and has room to grow.
Following these acquisitions, Mindspace REIT has become the number two player in the Chennai market.
As a strategy, we target assets with institutional sellers, Grade-A projects that offer significant mark-to-market opportunities.
Are you looking at more acquisitions in Chennai, and what are the cities on your radar currently?
We are not looking at immediate acquisitions in Chennai since we have just lapped up two assets in quick succession. Our current strategy is to strengthen our position in existing markets: Mumbai, Hyderabad, Pune, and Chennai. In three of these four markets, we are number one. In Chennai, we have now become number two.
The latest acquisitions will take our total leasable portfolio to 44.2 million sq ft from the current 39 million sq ft across key markets.
While there are no acquisition plans in the near future, we continue to evaluate potential assets from third parties as well as the sponsor pipeline. Although our primary focus is on existing markets, we continue to also evaluate potential opportunities in the National Capital Region (NCR) and Bengaluru.
Among tier-II markets, we see great opportunities in Kochi, Coimbatore, Lucknow, Indore, Visakhapatnam and Jaipur. However, we have no plans for these markets currently.
If one looks at the broader demand pyramid, 60% is driven by South India, comprising Bengaluru (30%), Hyderabad (20%), and Chennai (10%). West India contributes 25%, comprising Mumbai (15%) and Pune (10%), while NCR contributes the remaining 15%.
Source: Vccircle