BRIGADE — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
DIRECTOR · MS. NIRUPA SHANKAR – EXECUTIVE DIRECTOR
MS. NIRUPA SHANKAR – EXECUTIVE DIRECTOR MR. AMAR MYSORE -- EXECUTIVE DIRECTOR MR. ATUL GOYAL – CHIEF FINANCIAL OFFICER MR. RAJENDRA JOSHI – CHIEF EXECUTIVE OFFICER, RESIDENTIAL MR. VINEET VERMA – CHIEF EXECUTIVE OFFICER, HOSPITALITY MR. SUBRATA SHARMA – CHIEF OPERATING OFFICER, COMMERCIAL MR. OM PRAKASH P – COMPANY SECRETARY MR. PRADYUMNA KRISHNAKUMAR – VICE PRESIDENT,
INVESTOR RELATIONS · Management
Brigade Enterprises Limited May 19, 2021
Moderator · Conference Operator
Thank you.
The next question is from the line of Biplab Debbarma from Antique Stock Broking.
Please go ahead.
Biplab Debbarma
Sir, just wanted to understand on your excellent collections.
What is the reason for jump in collection and what would be the breakup of that collection like how much from residential, how much from others?
Atul Goyal
The collections is also because of the consistent sales which have been happening for last four, five quarters and of course construction has been at good pace.
So, we have been able to raise demand and based on that the collections have been coming. breakup for Q4, as I said Rs.840 crores is from residential, commercial sale is Rs.61 crores, commercial lease is Rs.60 crores, retail is Rs.32 crores, hospitality is Rs.96 crores and maintenance site PMS is around Rs.29 crores.
So that adds up to Rs.1,118 crores.
Biplab Debbarma
Second question is on your office rental.
From the previous questions, I understand that not all the leased property started generating rent.
So if we assume that there is no incremental leasing in the office space, whatever the leased area, if they become fully operational, what will be the total quarterly rent from this area in the office space?
Atul Goyal
Right now, rental has not started but next year since it will be a partial rental from WTC and it depends upon retail as to how the retail rentals come, where we should touch around approx. rs 736 crs of annual rental if both the properties get leased and retail get leased, which will come maybe in '22, '23.
Biplab Debbarma
No, no, my question is as it is, any one quarter whatever without incremental leasing, whatever we have leased out and all of them started generating rental, so what would be the total rental from those office space?
Atul Goyal
It should be in the range of Rs.80-85 crores.
Brigade Enterprises Limited May 19, 2021
Biplab Debbarma
In negotiations for renewals we have done, do you see any escalation in rentals or is it like at the prevailing rate?
Subrata Sharma
See, again, it depends upon the property and the micro market.
In a property like World Trade Center in Bangalore, where the vacancy is very less, it is a highly preferred property, okay.
In this case like we are at a better strong proposition.
So we will get the escalation, that is for sure.
In certain other properties, there might be the negotiations that would be going up, but we still expect that on a weighted average we should get 10% that is for sure.
Biplab Debbarma
So, you are expecting escalation even during this …?
Subrata Sharma
Why I am actually telling this because in all our properties whatever the new leases that we have actually signed in spite of dearth of a pipeline in the market, we have not gone below our rentals, weighted average rentals we achieved, in fact, we have gone above.
So that's why the thinking is that we wouldn't actually go lower on the interest particularly for the renewals also.
Moderator · Conference Operator
Thank you.
The next question is from the line of Parvez Akhtar Gazi from Edelweiss Securities.
Please go ahead.
Parvez A Gazi
A couple of questions from my side.
First, have we seen any kind of improvement as far as realizations are concerned on the residential side?
Second is what would have been the rental contribution from BTG this quarter?
And lastly, when do we expect rent from the WTC Chennai to commence?
Rajendra Joshi
In terms of price realization per square feet for FY'21, we saw almost 11% jump, the increase was nearly about Rs.400-500 per square feet because of the new launches that we did in Hyderabad and Chennai.
So overall there has been a significant price increase that has happened in FY'21 over FY'20.
Subrata Sharma
With regards to the BTG rentals, it was Rs.18 crores per quarter and as far as WTC Chennai rent commencement is concerned it will start from Q2.
Moderator · Conference Operator
Thank you.
The next question is from the line of Swagata Ghosh from Franklin Templeton.
Please go ahead.
Swagata Ghosh
Sir, a follow up on the realization question like-to-like were there any price hikes taken during December or March quarter?
Rajendra Joshi
So, we did see some price hikes in our ongoing projects in Bangalore and in Chennai, but what also contributed to the higher price was Hyderabad where we did launch a project and there also we took price hikes in the last six months that we have launched the project.
Brigade Enterprises Limited May 19, 2021
Swagata Ghosh
So this price hike was an exception versus history or was it like in line with what you have done, I just want to understand the strength of the market in the last six months and how do you expect the price hikes to pan out in the next say two years after the second wave is over?
Rajendra Joshi
So the price hikes compared to the previous financial year were better in FY'21 second half once the situation was kind of getting back to normal.
As chairman has pointed out, there is a consolidation in the market and therefore for larger developers like us in good locations we are able to command a better price.
Swagata Ghosh
Second question is on Karnataka stamp duty part.
I guess that comes into effect from April.
So how much of our inventory would be eligible for this cut?
Rajendra Joshi
So this was really for the affordable housing for up to Rs.45 lakhs.
So therefore, from our portfolio only about 6-7% of the total would be within this price bracket and most of that inventory what we have is also not getting ready for registration.
So it will be very minimal impact on our set of projects.
Swagata Ghosh
From a strategy perspective, if we are very confident of residential upcycle, does it not make sense to be really aggressive on business development right now before the cycle actually kicks in?
M.R. Jaishankar
As I mentioned earlier, business development is certainly an ongoing process at any given point of time.
Currently itself, we are in the process of negotiating or having discussion for not less than 7 mn.sq.ft. and in different locations.
And some have come to an understanding, so the due diligence and etc., will be in progress.
So, we are mindful of the fact, we will bear it.
Moderator · Conference Operator
Thank you.
The next question is from the line of Ritika Agarwal from Valuequest.
Please go ahead.
Ritika Agarwal
First question is like what percentage of our commercial portfolio we are witnessing pressure on rentals or escalations?
Subrata Sharma
We are not experiencing any pressure.
What I actually wanted to convey for the renewal call was we are renewing everything almost like 100% and as of now because of the strategic locations and the quality of the property we have not experienced rental pressure.
We have been able to actually go upon the weighted average of the past transactions.
Ritika Agarwal
We are in line with having escalations of around 5% every year on our existing commercial portfolio will be seeing pressure on rentals or escalation?
Subrata Sharma
As of now, no. Since our properties and the kind of occupancy that we have, we have not reduced the rental transaction.
Brigade Enterprises Limited May 19, 2021
Ritika Agarwal
The renewals which you said is being happening at the current weighted average rate for the portfolio?
Subrata Sharma
Renewals are happening as per the respective terms of the contract.
So, say a tenant-X is having certain percentage of escalation and certain rentals they are actually currently on, so the same terms will actually continue for the renewals, normally the terms wouldn't be changed.
Ritika Agarwal
Secondly, on the hospitality portfolio.
We were looking to divest part of it or completely.
Any talks on that?
Nirupa Shankar
Not at the moment because as we mentioned in the last call whatever discussions we were having in FY'20 because of the lockdown and COVID that investor kind of decided not to go ahead with it.
This year we have received some request to discuss.
But then it doesn't make sense with the kind of valuations that we are currently receiving.
So we have the ability to kind of withstand the second wave because we are somehow managing paying back all our interest, loans and things like that.
So we will look at it when there is an investor who is ready to give a decent valuation and probably when the timing is more apt for this kind of a deal, otherwise we would not be keen to kind of divest at a distress valuation.
Ritika Agarwal
Lastly, what is the target for the debt reduction in the medium-term?
Atul Goyal
We have already been reducing our debt continuously in residential.
So I don't hope that major debt increase will happen in resi or hospitality.
In hospitality, whatever increase is there on account of ECLGS loans… of course, there will be increase in debt in commercial section where all the construction d when the leasing happens in Tech Gardens and WTCs, that will get converted into LRD in future.
So the major chunk of that increase will be in LRD that is the conversion from construction loan to LRD.
Moderator · Conference Operator
Thank you.
The next question is from the line of Prem Khurana from Anand Rathi.
Please go ahead.
Prem Khurana
Sir, a few questions.
One was is it possible to share how the market share changed in case of Bangalore?
As I see, it looks like that we have seen during the year is essentially in Chennai as well as Hyderabad YoY growth and I am assuming Bangalore otherwise would have been little slow.
So if you could share your thoughts on the way the market share has changed for us during the year in Bangalore and what number do you see is possible for anyone to be able to go to in terms of market share in any of these markets especially Bangalore?
Rajendra Joshi
As you correctly pointed out, a lot of our growth for FY'21 was driven by Chennai and Hyderabad.
In Bangalore, in FY'20, we had substantial part contributed from Bangalore because we had two new launches in El Dorado, North Bangalore and Utopia in East Bangalore.
So therefore, the contribution of Bangalore did come down.
But from a market perspective, I Brigade Enterprises Limited May 19, 2021 dothink that Bangalore is quite vibrant.
Bangalore has also moved up the chain and therefore the demand for larger units, more premium units from branded developers like us is continuing to increase.
We do see increased demand for larger size units for the 3BHK, three-bedroom units, etc., So, I do not see too much of muting of demand in Bangalore.
It's just that in what stage of the project lifecycle we are there and we have new launches, etc., So, I think that would determine the traction from Bangalore.
But otherwise, we will see traction from Bangalore to be continued.
Prem Khurana
Possible to share any number in terms of percentage, what is our market share today and what are we targeting?
Rajendra Joshi
Market share, it is difficult to estimate at this point in time because there is no one accurate agency unlike in commercial space where we have accurate prediction.
But we do think that in Bangalore we are #2 player in the residential space.
Prem Khurana
So, when I look at the balance sheet, seem that we are trying to conserve cash which is you have explained in the higher cash balance in the buffer that we have created but at the same time when I look at our launch pipeline I get to see over the last two quarters or rather three quarters we have seen launch pipeline in terms of CAPEX properties go up from 0.8 mn.sq.ft. to 1.8 mn.sq.ft.
So how do I marry these two because on one side we are trying to conserve cash in hospitality and as well as trying to generate more cash where on commercial side we are willing to make up more CAPEX properties which is where you would have to spend money now?
Atul Goyal
We are not taking more CAPEX projects. .
So we have capitalized tWTC and Tech Gardens this quarter and that is why in balance sheet you are looking higher investment property number.
So it's mainly because of the capitalization of Tech Gardens and WTC where not much CAPEX is remaining to spend.
Of course, now there is one big project which is twin towers and we have sufficient financing lines to support that project going forward.
Moderator · Conference Operator
Thank you.
The next question is from the line of Adhidev Chattopadhyay from ICICI Securities.
Please go ahead.
A Chattopadhyay
Now our share of debt levels that we brought it down by around Rs.300 crores in a single quarter, so for next couple of years where do we see the debt levels overall head for the company considering that our residential cash flows are pretty strong and peak of our CAPEX cycle is behind us with WTC in Chennai being completed?
Atul Goyal
So as I said, Adhidev, it will be mainly in LRD where the debt level will remain and it will get increased because we will be converting that construction loans into LRD.
So I don't see a major change.
Maybe next year because of the WTC we may have around Rs.300 crores of LRD again coming in.
And of course, Tech Gardens LRD will happen only if we are able to lease it in the right time.
Brigade Enterprises Limited May 19, 2021
A Chattopadhyay
I understood but I am saying as an aggregate for a company for next couple of years.
So considering our cash flows for resi, do we see our share in net debt going up further in aggregate?
Atul Goyal
Our exposure of BEL right now is Rs.2,654 crores, if every LRD gets converted it should be maximum by Rs.3,000 - 3,100 crores.
Moderator · Conference Operator
Thank you.
The next question is from the line of Pritesh Sheth from Edelweiss Wealth.
Please go ahead.
Pritesh Sheth
Just one clarification.
We are not offering any discounts on the CAM income that we collect for our commercial tenants, right?
M.R. Jaishankar
There are two things; one is in the case of office tenants, there is no reduction in CAM because in every way the properties are maintained and because they are also operational, 100% of the people may not be there but all the systems, etc., are operational and the limited staff will always be there and the electricity consumption of all these people are quite high as before the lockdown or the work from home concept, they still consume 70-80% of the electricity.
As regards the retail thing, we have offered 25% reduction in Jan during the lockdown period by reducing various expenses and benefit of that will be passed on to the clients.
Pritesh Sheth
Lastly, on your Southfield property, 0.35 mn.sq.ft.
So that will be completed in Q1 and then commencement will be from Q3 onwards?
M.R. Jaishankar
Rent commencement is from 1st July.
Property is completed.
Our tenants are doing their interiors.
Moderator · Conference Operator
Thank you.
The next question is from the line of Venkat Samala from Tata Asset Management.
Please go ahead.
Venkat Samala
Sir, you did highlight without giving any number that currently you are under discussions in various stage of about 7 mn.sq.ft. pipeline.
So given the fact that you have a very limited development potential left in Hyderabad and Chennai, will it be fair that incrementally in terms of pipeline addition your focus would be in these two markets?
M.R. Jaishankar
In Chennai, we have finalized a million square feet of residential development potential.
It is in a due diligence.
And another million square feet in commercial after World Trade Center.
That is also in a design stage and approvals should take time.
As far as Hyderabad is concerned, we are in active discussion with a few parties.
And I would say all this second wave of virus has slowed down the discussion progress.
Other large place is in Bangalore.
In any case, 70% or more of our business in Bangalore.
Venkat Samala
Sir, you did launch about 6 mn.sq.ft. in FY'21.
Should it be fair in assuming that lockdown parts opening up from next month onwards, we should expect a similar number and given the Brigade Enterprises Limited May 19, 2021 optimism that you have at this point in time that consumer sentiment will reflect into better sales hereon?
M.R. Jaishankar
I would say we are certainly working towards that.
The exact number is difficult to say because of the approval of some of the projects.
So generally things have slowed down even in approvals and the work in the government and civic authorities.
Moderator · Conference Operator
Thank you.
The next question is from the line of Biplab Debbarma from Antique Stock Broking.
Please go ahead.
Biplab Debbarma
Sir, I just wanted to understand your EBITDA margin.
Although we have seen a price rise in residential, when do you expect this EBITDA margin to improve, do you see significant jump in the next two, three years for the margin to go to say 23%, 25%, what would be the margin that you would be looking for in the next one, two years?
M.R. Jaishankar
I would say that as you rightly pointed out in the next one to two years it should happen.
Because of the repeated impact of COVID first wave and second wave, there were some challenges.
Otherwise, it should improve.
Also, the cost escalations and all those aspects are also being faced, whether due to steel price increase or any other metal price increases.
So in financial year '22 we do expect a substantial jump in prices, whether one likes it or not.
Biplab Debbarma
So you expect around 22%, just ballpark I just wanted to understand when you say improvement in EBITDA?
M.R. Jaishankar
Yes, it can happen.
Moderator · Conference Operator
Thank you.
The next question is from the line of Parikshit Khandpal from HDFC Securities.
Please go ahead.
Parikshit Khandpal
Just a follow up on the land 7 mn.sq.ft.
So, in the current market what could be the t square feet of FSI cost ballpark?
M.R. Jaishankar
It all depends on location of the project, it can vary from Rs.1,000 a sq.ft. to FSI cost can go to Rs.2,000, that is the core, depending on the location of the project, in some cases it can go to Rs.3,000 FSI also, it all depends on that.
Parikshit Khandpal
Say on 7 mn.sq.ft. even if you take the base cost of Rs.1,000, it's about Rs.700 crores.
So how will the…?
M.R. Jaishankar
This is if you buy, but the same 7 mn.sq.ft. if it is on joint development, it may require only Rs.70 to 100 crores.
Brigade Enterprises Limited May 19, 2021
Parikshit Khandpal
Any breakup of this, how much would be 7 mn.sq.ft. could be outright and because….?
M.R. Jaishankar
Too premature but as and when there is development we will tell you certainly.
Parikshit Khandpal
Because you hardly have any debt on residential businesses, Rs.200 crores number which you earlier told, that could be on the higher side in terms of annual land acquisition cost?
M.R. Jaishankar
No, I think that is a fair estimate, combination of some purchase, some joint development, etc., But as you rightly said, we have headroom.
So depending on the situation we will take right call whether a property to be purchased or it should be on joint development.
Parikshit Khandpal
Any view on this 1 million of acquisition planning for commercial in Chennai, will it be outright purchase or will it be…?
M.R. Jaishankar
That's on joint development basis and it is on the Pallavaram-Thoraipakkam road what is called PT road, it is already signed and we are in the design, development and applying for approval.
Parikshit Khandpal
That was in the Prestige and other developers which you had earlier signed, same thing or different?
M.R. Jaishankar
It is on the same road, but not what we have jointly done, that is on OMR road for a mall.
Parikshit Khandpal
What will be the CAPEX, this will be a joint development, right, no money outgo as such?
M.R. Jaishankar
This is a joint development.
Parikshit Khandpal
Not for strata sale , this is clearly a leasing project?
M.R. Jaishankar
Yes, for lease only.
Moderator · Conference Operator
Thank you.
Ladies and gentlemen, that was the last question.
I now hand the conference over to Ms. Nirupa Shankar for closing comments.
Nirupa Shankar
Thank you, everybody for your participation.
I hope we have been able to answer the questions to your satisfaction.
This pandemic has brought about an unexpected change to the way we do business.
It has set off the trigger for prop tech adoption and investment in real estate as well.
Brigade Real Estate Accelerator Program, (REAP) saw 11 start-ups, raised a sum total of $4.5 million in the early stages of investment in the post-COVID era.
Two more Brigade REAP start- up in the data analytics and (VR) Virtual Realty space were acquired by Square Yards in the same period.
We have also witnessed a global inch up in Indian prop tech with startAD an accelerator in New York, selecting Brigade REAP to manage its prop tech program in UAE.
While many of the technologies we have come across are cutting edge and will certainly pave Brigade Enterprises Limited May 19, 2021 the way for doing business more efficiently in the future, we must take a moment to deal with the crisis currently at hand especially one that hit home so hard.
Brigade through its CSR foundation, plans to spend close to Rs.10 crores this year towards health and COVID-related initiative.
Along with starting the construction of a 100-bed hospital, we will be donating healthcare equipment such as patient monitoring systems, ventilators, ultrasound machines, bypass machines and oxygen concentrators to a number of charitable hospitals in Bangalore such as the Baptist Hospital, Chinmaya Mission Hospital, Shri Sankara Cancer Foundation and St.
John's Medical Hospital.
We are also supporting various COVID care treatment centers like SPY in Mysore which serve the tribal areas of Mysore and neighboring districts.
Lastly, we have provided COVID-related emergency expenses to frontline workers such as food, medicines and PPE kits.
We hope that by the time we speak again next quarter, we would have overcome the worst of this virus.
Till then, wish you all to stay safe and stay healthy.
Jai Hind.
M.R. Jaishankar
Thank you.
Moderator · Conference Operator
Thank you.
On behalf of Brigade Enterprises Limited, that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
Questions and answers
Moderator · Conference Operator
Thank you very much.
Ladies and gentlemen, we will now begin the question-and-answer session.
The first question is from the line of Adhidev Chattopadhyay from ICICI Securities.
Please go ahead.
A Chattopadhyay
First question is on the residential business.
Could you just quantify for this quarter the percentage breakup of say between Bangalore, Hyderabad and Chennai if that is available?
Rajendra Joshi
Good afternoon, everyone.
For the Q4, we had nearly 60% of our sales coming from Bangalore and the balance 40% coming between Chennai and Hyderabad.
A Chattopadhyay
Chennai would be the WTC residences, right, that is the only project or Xanadu is also included.
Rajendra Joshi
We have two projects; Xanadu in West Mogappair and WTC Residences.
So both these put together contributed, the volume and value really came from Xanadu, Xanadu saw very good uptick in Q3 and Q4.
A Chattopadhyay
Since you have done such a good performance even under COVID in FY'21, so any range of guidance for the residential business which you are targeting for next year?
Rajendra Joshi
As you know, we normally do not give guidance numbers, but first quarter will definitely be muted as Mr. Jaishankar pointed out because of lockdown in all three cities that we majorly operate in.
We do expect that from Q2 onwards business will pick up.
A Chattopadhyay
Second question is on our mall business.
Mr. Jaishankar alluded that we have signed up new leases and also you have done rental renewals.
So with the lockdown again happening and malls being shut, now could you give us a color on what is the sort of rental waivers or anything that we may have to give or is it too early to take a call there?
Brigade Enterprises Limited May 19, 2021
Nirupa Shankar
Hi, Adhidev, Nirupa here.
We followed a fair pattern last lockdown based on the different kind of categories, obviously for cinema, that was different, food and beverage it was different, anchors was different, vanilla stores was different, but basically from most of the stores especially the apparel stores, we were able to get some sort of maybe like between 25% to 50% of the minimum guaranteed rental.
Once the lockdown is over, we had a slab structure for that as well, so for instance, suppose the retailers did about 75% to 100% of the pre-COVID level sales, then we would charge them say 100% of the MG.
If it was between maybe 50% to 75%, it would be 75% of the MG.
We had different slab for various categories and we had come up with an agreement where all of us where tenant and we signed off in that agreement last lockdown period and post lockdown period.
So what we are doing is we have proactively reached out to all the tenants in this lockdown and said, that we plan to follow a similar structure as last time so that we do not have to reinvent the wheel and waste time and effort on renegotiation.
So our communication has gone out to most of them already and we hope to sort of decide on the commercials during the lockdown period.
So, that once we open, everybody already knows what their dues are and we can just focus on business.
A Chattopadhyay
For FY'21, for the mall business, how much you would have collected had the lockdown not been there?
Nirupa Shankar
Actually for FY'20, it was approximately Rs.120-odd crores and we did about 50% of that in FY'21.
Had the lockdown not been there, then it would have been much more obviously because we look on annual growth.
Moderator · Conference Operator
Thank you.
The next question is from the line of Pritesh Sheth from Edelweiss Wealth.
Please go ahead.
Pritesh Sheth
Firstly, you had a good new launches in this quarter.
So how much that contributed to our overall sales?
Rajendra Joshi
The new launches for last quarter contributed about 30% of the total sales by value.
Pritesh Sheth
Looking at your pipeline for FY'22, obviously there is uncertainty around, but it looks a tad lower.
So where can the pipeline go in terms of launches expected for FY'22?
Rajendra Joshi Currently, what we have indicated is where we have a visibility on approval.
There are some more projects which are in the pipeline which we intend to launch as and when we get approvals and also based on market sentiments for the year FY'22 we have fairly good stock in the pipeline.
So can we expect launch pipeline to continue to be around 5, 6 mn.sq.ft. that you reported over the last three years?
Brigade Enterprises Limited May 19, 2021
Rajendra Joshi
What we clearly see is that there is an inherent demand which is there this time.
The second feedback from the ground is that the customers are a lot more confident this time compared to last time because last time it was the first time that we had this kind of pandemic and the customers were very unsure of their income stream, etc., the uncertainty is much lower but one has to wait and see how the pandemic would play out simply because this time it is a lot more lethal and a lot more contagious compared to last time.
Pritesh Sheth
On Xanadu-IV, you had one minimal launch this quarter but I do not see in the FY'22 pipeline which you have indicated.
So any change of plan there?
Xanadu is ideally doing good.
Rajendra Joshi
With this one last cluster phase we are yet to launch.
We are in the process of soft launch.
So that will get into action once the lockdown is over.
Moderator · Conference Operator
Thank you.
The next question is from the line of Yash Gupta from Angel Broking.
Please go ahead.
Yash Gupta
Can you throw some light on how the construction activities are going on in our various projects and as well as how customer enquiries, whether it is online or offline?
M.R. Jaishankar
As far as construction activity is concerned, they were all progressing quite robustly.
We have nearly 11,000 workmen in various sites.
Only during the lockdown I think there has been a gradual decline.
But in spite of that, we have about 70% of the workmen working in our different sites.
And I think once the lockdown is lifted, within a few weeks, the numbers will come back to the previous level and it may even go up.
As far as the business scenario is concerned, I think Joshi can add about our efforts on digital marketing and others.
Rajendra Joshi
As far as enquiries are concerned, they have been online, in fact, digital has been the main source of our enquiries for the last three years but because of the lockdown in the last two to three weeks, lot of transactions whatever that was happening has been online transaction because we are not operating our sales offices in most of the cities.
Yash Gupta
Second question is on commercial office side.
Can you share some detail on how the demand is there in the market and along with that if any details you can share on the latest deal we have done on the commercial office side?
Subrata Sharma
As far as commercial segment is concerned, we feel that there is a significant amount of latent demand because of the robust hiring that is going on in IT, ITES sector plus the sector is also growing.
Though not as vigorously as it was doing earlier, but there is a significant room.
We also experience the same.
When we started this quarter, we actually concluded five transactions and we were actually hoping to do more but because of the lockdown again everything became muted.
So, overall, we feel that based upon our current pipeline of 1 mn.sq.ft. and the kind of enquiries that we are getting, even today we got an RFP.
So there is a kind of significant latent Brigade Enterprises Limited May 19, 2021 demand.
We are just waiting for the things to normalize.
So unless and until the reoccupancy start happening, we do not feel that real estate discussions will happen in the company.
Though as much as strategy orientations, almost all the companies who actually wanted to sign up in in the phases, internal discussions are on.
Yash Gupta
I think in the first quarter you have done a deal with Teva Pharma.
So how that particular deal is different from the pre-COVID deals that we used to do, is there MTM pretty much larger on this type of deal what we are doing currently?
Subrata Sharma
What is happening you know, if you ask me based upon our experience, whenever the deal size is huge, then companies would actually take more time to understand how the market phases pans up so that they can plan their manpower resources, movement or deployment of their CAPEX, etc., But so far that we are seeing, the gaining momentum is majorly from the mid-size and so far like 1 lakh sq.ft. to 2 lakh sq.ft. of transactions wherein companies want to actually gain the cost advantage.
And we have seen quite a significant momentum in our GIF City because.e of the various asset classes getting included under IFS, so we saw more transactions getting closed there and we have done sizeable deal in GIF City.
Then we also saw some quite good number of enquiries in terms of mid-size companies asking for spaces and discussions are on.
So the momentum is majorly as on date from the midsize and so far 1 to 2 lakh bracket but at the same time we are in discussion for very large size transactions but that we feel will take time.
Moderator · Conference Operator
Thank you.
The next question is from the line of Parikshit Khandpal from HDFC Securities.
Please go ahead.
Parikshit Khandpal
In the last two quarters we have done 1 mn.sq.ft. and 1.5 mn.sq.ft. now.
So if I annualize it, maybe the ballpark somewhere about 4 mn.sq.ft. to 6 mn.sq.ft. annual.
If I see your overall pipeline, so we have about 7 mn.sq.ft. of unsold launch project and about 30 million odd feet of land bank.
So from the business development perspective, we have about five to six years of land bank.
My first question is out of the 27 million, how much can we brought into the market or is it ready to be launched in the market?
Second would be again on business development.
Can you just highlight your business developmental efforts both on land acquisition be an opportunity in context of kind of volumes which you are doing right now.
M.R. Jaishankar
While as earlier mentioned, we may not want to give the guidance, but it is a desire of every company to do better year-after-year that is our objective also.
As I said, as far as Q1 is concerned, since it is muted, we will not be in a position to estimate for the rest of the year till the things improve.
But we hope things will settle down in the coming months itself.
And having said that, other than 1.43 million with approvals that are ready to be launched, we have nearly 2 mn.sq.ft. more that we should be able to get approvals fairly soon or within the next two quarters and be able to launch that.
And of the five, six years stock that we have, these are all very-very Brigade Enterprises Limited May 19, 2021 doable and they are also in different stages of design development and also depends on various permissions, considering some of them are large projects, so it may take a little bit longer in order to get the environmental clearances and related thing.
But I think we are at it and naturally acquiring more properties is an ongoing process, that exercise is always on.
Parikshit Khandpal
Last time, you invested close to Rs.185 crores in land, so do you think this will be succeeding on an annual basis for next few years?
M.R. Jaishankar
Probably yes, but it all depends whether we end up signing joint development agreements or we end up signing properties to purchase, but I think that kind of estimate is not wrong, we have to keep that in mind.
Parikshit Khandpal
My second question is on the commercial leasing business.
Now, we had seen a decent start for the fourth quarter and five transactions were concluded.
Just wanted to know what is the total quantum of this transaction and which project?
And second thing would be on BTG.
So there what kind of RFP we are seeing for BTG project and when do we see us rental start kicking up there, from which quarter, maybe in the financial year where we start getting some positive development in that?
Subrata Sharma
As far as the transactions are concerned, so as I said, these are mostly small and medium-size companies that we concluded.
So overall it would be somewhere around 0.1 million.
But having said that, we have high probability pipeline.
Actually, we are focusing on another about 0.25 million of transactions in this quarter.
That was the outlook like before this lockdown.
Having said that, majority of the pipeline that we have, out of 0.1 million pipeline, almost 75% of it actually pertains to Brigade Tech Gardens.
And as I was mentioning just a while ago that the priority that we receive that is also focused on same micro markets.
Going forward, we feel that there will be quite a good amount of enquiries of Brigade Tech Gardens majorly because of the strategic location and also in outer ring road we have that micro market having very less vacancy.
There was a lot of expansion, consolidation that will actually sought after by the companies and they will find BDG as a very good valid proposition.
So that is why we are quite confident of the marketability of the property going forward.
Parikshit Khandpal
When do we see one of the bigger ones of this materializing… third quarter of this financial year or October?
Subrata Sharma
So far as the bigger deals are concerned, companies will take more time to actually think on the strategic expansion route how they actually plan their CAPEX, etc., so that certainly will take time and we feel that once things actually normalizes, around three months from that phase, I think these companies will actually start acting on those.
To give you an example, we have a few transactions.
Those are kind of 1 lakh sq.ft. in the range.
They have been discussing with us for the past one year.
Because most of the IT companies have actually accelerated hiring, so they Brigade Enterprises Limited May 19, 2021 want their manpower to come back.
So these discussions are happening and we feel that as soon as things normalize, these companies will start taking decisions.
As you rightly said, two quarters from now, I think that would be a fair estimate.
Parikshit Khandpal
Lastly on the pre-sales sir, this quarter you said will be muted.
So muted like it could be 50% to 100% in that range or less than 50% of the fourth quarter number?
Rajendra Joshi
Very difficult to estimate a percentage at this point in time because we still do not have clarity as to when the lockdown will get lifted, etc., if the lockdown gets lifted, we should see a better June.
Moderator · Conference Operator
Thank you.
The next question is from the line of Amandeep Singh from Ambit Capital.
Please go ahead.
Amandeep Singh
Sir, you did mention about construction been impacted given labor issues and lockdown restrictions especially in Bangalore.
But will it be possible to quantify how much delay would you expect in terms of ongoing construction across your portfolio?
M.R. Jaishankar
At this point of time if you ask me the lockdown could be lifted by the end of the month or earlier, it may mean like four to six weeks or maybe sometimes even eight weeks because labor has to come back.
I think only when lockdown is lifted, we will be in a position to assess it.
Last time it was very strict national lockdown and with a lot of migrant laborers went back encountering a lot of difficulties.
So for that to revive it took almost four to five months time in terms of activity revival but this time I do not think it is going to happen like that primarily because it is not a total lockdown unlike last time.
Construction activity is still allowed, but maybe the extent of activity is as I said it is down by 30%, 35%.
We will be able to estimate once work resumes.
Amandeep Singh
Secondly, with respect to your commercial portfolio.
Will it be fair to assume that increased area of Brigade Tech Gardens and recently added WTC Chennai would start yielding rentals 1Q FY'22 onwards and consequently what should be the exit annualized rentals at current occupancy for the entire leasing portfolio, any sense on that?
M.R. Jaishankar
As far as Brigade Tech Gardens, the first phase of 1 mn.sq.ft. is yielding rent already and second phase some rent will start in Q2 and same with WTC, Chennai, beginning Q2 it will start, graded approach is there.
Amandeep Singh
As a follow up to this, could you help us understand how much of your existing commercial portfolio would be up for renewal in FY'22 and if you are expecting any exit?
Brigade Enterprises Limited May 19, 2021
Subrata Sharma
As far as our capabilities of retaining tenants, last year also we could retain the entire 100% of the tenants.
And this year also we have approximately 5 lakh sq.ft. coming up for renewal.
Out of that 4.9 lakh is for sure, means we have already gone ahead with the discussions on renewals and we are doing the formalities.
10,000 sq.ft. is under discussion, but that also will get renewed for sure.
We have capability in terms of closing almost 100%.
Amandeep Singh
Will it be possible to give any sense on this 4.9 lakh renewals, what would be the escalation or re-leasing spread approximately?