Mindspace Business Parks REIT (MINDSPACE) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of Commerzone Raidurg, a 1.82 million sq ft Grade A office asset in Madhapur, Hyderabad, strengthens the portfolio in a prime CBD location and aligns with the growth strategy.

• Asset is fully leased to Qualcomm, a Fortune 500 company, ensuring stable, long-term income and portfolio stability with a WALE of about 12 years.

• Increases Hyderabad portfolio to approximately 15 million sq ft and total portfolio to 36.6 million sq ft, enhancing market leadership.

• Acquisition aligns with growth strategy, driving both NOI and GAV growth post-acquisition.

Financial terms and conditions

• Acquisition price is INR 2,038 crore (INR 20,380 million), representing a 7.5% discount to the average of two independent valuations.

• Adds INR 167 crore to NOI on a pro forma FY25 basis, implying 8.2% NOI growth.

• Preferential issue of up to INR 613 crore, subject to unit holder approval, with up to 16.17 million units issued at INR 379.08 per unit.

• LTV ratio post-acquisition will be 25.3%, leaving headroom for future growth; portfolio GAV increases to around INR 33,550 crore.

• Consideration to sellers is via a swap of shares for REIT units; net debt of INR 13,812 million to be refinanced post-acquisition.

Synergies and expected cost savings

• Asset is fully leased, ensuring immediate and stable income accretion; asset management division margins contribute to overall NOI.

• CAM revenue generated on the entire 2.8 million sq ft, including landlord's area, with cost-plus-20% contracts.

• Mark-to-market rental potential due to current rentals at INR 69 per sq ft/month, with market rates above INR 80-90 and income support until December 2025.

• Acquisition is accretive, with an estimated 8.2% growth in FY25 NOI and 0.8% accretion to FY25 DPU on a proforma basis.

• Implied cap rate for the asset is 8.1%, higher than the existing portfolio's 7.4%.