Mindspace Business Parks IPO subscribed 41% on Day 2 so far

NEW DELHI: The initial public offering (IPO) by Mindspace Business Parks REIT IPO received 41 per cent bids on Day 2 of the bidding process on Tuesday.

The issue attracted bids for 2,75,55,200 units, which was 40.67 per cent of the total issue 6,77,46,400 units.

Investors can bid for a minimum of 200 units in the price band of Rs 274-275, and in multiples thereafter. At the upper end of the price band, potential investors would be required to invest a minimum of Rs 55,000 in the issue. Analysts said the IPO is a play on a stabilising rent-yielding office portfolio.

The Mindspace REIT’s unit is valued at 87.1 per cent of its net asset value (NAV), as compared with the listed Embassy Office Parks (EOP) REIT, which is trading at 98.1 per cent of its NAV.

REITs or real estate investment trusts are companies that own or finance income-producing real estate. The stockholders of a REIT earn a share of the income produced through real estate investment.

Mindspace Business Parks REIT is looking to raise up to Rs 1,000 crore through issuance of fresh units and up to Rs 3,500 crore through an offer for sale. On Friday, the REIT raised Rs 2,644 crore from the anchor and strategic investors, with HSBC Global, Fidelity and Nomura Trust, Capital Income Builder and Cohen & Steers among major investors.

Analysts noted that the company, which originally filed a draft offer document with SEBI on December 31 and again filed a new offer document with SEBI on July 17, has reduced its market-to-market (MTM) expectations on upcoming lease renewals. In the original draft offer document filed by the company, the MTM spread for FY21 and FY22 was 40 per cent and 44 per cent, respectively. This spread expectation has been reduced to 34 per cent and 40 per cent for FY21 and FY22, respectively.

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Mindspace’s completed portfolio of 23 million square feet is 88 per cent occupied, with 6.4 million square feet of brownfield development likely to accrue over the next 5-7 years. It succeeded, Mindspace would be the second REIT to list on stock exchanges after Embassy Office Parks REIT’s in March 2019.

IIFL said Mindspace REIT is a play on the stabilised rent-yielding office portfolio, spread across the Hyderabad, Mumbai Metropolitan Region (MMR), Pune and Chennai markets.

“The REIT is projecting a distribution yield of 7.5 per cent for FY22, largely through the tax-efficient mode of dividends. Even as the ongoing Covid-19 poses risks to the near-term projections, we believe that over time, Mindspace REIT would offer a steady double-digit total return structure, on a steady & growing dividend-income stream. We recommend subscribing to the issue,” the brokerage said.

The brokerage noted that the Midspace REIT portfolio has delivered an in-place rental of 6.7 per cent compounded annually over FY17-20, outpacing markets, and added 6.6 million square feet capacity. For FY20-23, the REIT has projected 17 per cent growth in net operating income (NOI), on the back of 4-5 per cent contracted lease escalations, increasing occupancy from vacant lease up and 2.8 million square feet sq.ft of new construction, and MTM potential. 02249360600

“The portfolio and tenant base is diversified & well-positioned; 85 per cent of the tenant base involves MNCs, and 44 per cent from technology and 22 per cent from financial services,” IIFL said.

Nirmal Bang, which attended an analyst meet by the REIT, suggested the company did not face significant disruptions in the operations from Covid-19 during the financial year ended March 31 and collected 99.4 per cent of gross rentals for March.

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“The properties were not fully occupied by the tenants for the months of April and May. As of May 31, committed occupancy of the portfolio was 92.4 per cent and in-place rent across the portfolio was 52.5 per square feet. The company derived 99.4 per cent of the gross rentals from the leasing of office premises and has not witnessed a significant decline in the rent receipts during April and May. It collected 97.8 per cent and 95.2 per cent of gross rentals for the months of April and May, respectively,” the brokerage said.



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