On Friday, Investec (LON:INVP) updated its outlook on Mindspace Business Parks REIT (MINDSPCE:IN), increasing the shares target to INR 390.00 from the previous INR 360.00. The firm has decided to maintain a Hold rating on the stock.
The revision in the price target follows Mindspace's recent analyst day where the company presented its growth strategy. The strategy focuses on three main areas: leasing up vacant areas, completing under-construction assets, and developing its future project pipeline. These initiatives are expected to generate an additional net operating income (NOI) of approximately INR 9-10 billion for the real estate investment trust (REIT).
Mindspace's sponsor, K Raheja Corp, is also contributing to the growth narrative by constructing around 20 million square feet of commercial office properties in key markets. This construction is anticipated to provide a steady stream of assets that can be added to the REIT's portfolio through a right of first offer (ROFO) mechanism. The sponsor has emphasized that asset transfers will occur when the valuations are favorable and the properties are stable, aiming to ensure that acquisitions are either net asset value (NAV) neutral or accretive, with a clear cash flow visibility.
Despite the positive growth prospects, the analyst pointed out that Mindspace's current valuations are only about a 3% discount to the NAV, implying limited upside potential at this time. The Hold rating reflects this perspective, suggesting that while Mindspace is a solid choice for investing in the commercial real estate (CRE) sector, the current price does not offer significant room for appreciation.
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