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Mindspace Business Parks REIT has leased out an entire commercial building–Citibank India’s erstwhile headquarters in Mumbai’s business district Bandra-Kurla Complex (BKC)–to IDFC First Bank for a nine-year term, people aware of the development said.

K Raheja Corp and Blackstone Group-backed listed Mindspace REIT had acquired the building, The Square BKC, a marquee structure, from Citibank in 2019 for around Rs 400 crore.

IDFC First Bank has leased the 10-storey property spread over nearly 1.30 lakh sq ft at a monthly rental of Rs 280 per sq ft, taking the annual payout to Rs 44 crore. The agreement includes a rental rest clause with 15% escalation every three years, taking the total lease value to over Rs 450 crore over the nine-year term.

“The Square BKC (the erstwhile Citibank building) now stands fully leased,” Mindspace REIT said in its July-September earnings statement on Friday.

The deal is another sign of the recovery in office leasing, not only in peripheral but also in prime business districts following the aggressive vaccinations and the gradual return of employees to offices.

“We continue to witness strong leasing activity across our portfolio with over 2.1 million sq ft leased in the first half of this financial year,” said Vinod Rohira, CEO of Mindspace Business Parks REIT. “We remain increasingly confident of the commercial market outlook, buoyed by record tech hiring and growth trends, improved GCC prospects, vaccination coverage in our gateway cities as employees return to office. We are excited about the robust demand cycle re-emerging.”

However, he declined to elaborate on the BKC lease transaction.

ET’s email query to IDFC First Bank remained unanswered.

The REIT has recorded a robust gross leasing of 9 lakh sq ft, with an average rent of Rs 88 per sq ft a month across 11 deals concluded during the quarter. It has also concluded another build-to-suit lease of 5 lakh sq ft at Mindspace Juinagar in Mumbai Region. Over the last two quarters, it has leased 2.1 million sq ft in total.

Mindspace REIT has continued to collect over 99% of its gross contracted rentals and has reported net operating income of Rs 359.2 crore, up by 6.7% from a year ago.

The REIT has declared distribution of Rs 272.8 crore or Rs 4.60 per unit for the quarter, taking its annualised distribution yield to 6.7% on the issue price of Rs 275 per unit.

The record date for the distribution is November 18, payment of the distribution will be processed on or before November 27.

The REIT has raised around Rs 400 crore through issue of debentures at project level at 6.1%, helping the reduction in average cost of debt further by 15 basis points to 6.9% as on September-end.

The July-September quarter has already witnessed a sharp uptick in absorption of office spaces, led by leasing activity in the information technology and IT-enabled services sectors.

Lease transactions for large office spaces are being registered across key property markets, led by steady economic recovery, an aggressive vaccination drive across the country, and increasing number of corporates planning return of their workforce to office.

The IT, ITeS sectors are among the prime drivers of overall leasing activity in the top cities, and bulk hiring by these firms is expected to influence the demand for large quality office spaces.

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