Phoenix Mills Ltd

NSE:PHOENIXLTD

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 Results Conference Call of The Phoenix Mills Limited.

[Operator Instructions]

Please note that this conference is being recorded. Today, we have with us Mr. Shishir Shrivastava, Managing Director; Mr. Kailash Gupta, Group CFO; and Mr. Varun Parwal, Group President, Strategy, Internal Audit and Head Corporate Finance. I now hand the conference over to Mr. Shishir Shrivastava. Thank you, and over to you, sir.

[Shishir Shrivastava, executive]

Good morning, ladies and gentlemen. I take pleasure in welcoming you all to discuss the operating and financial performance for the fourth quarter and year ended March 2024. However, before we proceed, I'm very pleased to welcome Mr. Kailash Gupta, as the company's group CFO. Kailash brings over 25 years of experience across various financial disciplines, including business strategy, Investor Relations, M&A, financial planning and analysis, treasury and taxation to name a few. Most recently, Kailash served as the CFO at Inox Leisure Limited for 8 years, leading their financial and commercial operations. He played a key role in the merger of Inox with PVR Limited.

Prior to Inox, Kailash held significant positions at Torrent Pharma, Entertainment Network, Thomas Cook, Tata Teleservices and The Aditya Birla Group. Kailash is a qualified chartered accountant from the batch of 1995 with a well-proven track record. He has received several accolades, including the CA CFO award for media and entertainment industry from the ICAI and was also recognized as one of Asia's 100 power leaders in finance by White Page International. We are confident that his expertise will be instrumental in our continued growth and performance.

I will now take you through the key highlights of the results with reference to the relevant slides of the results presentation. If I may draw your attention to Slide 3. Starting off with a quick overview of the retail business. FY '24 has been a milestone year for the business. At the start of this financial year, we have set sights on stabilizing the 4 new malls and driving growth across the existing operational assets. I'm very pleased to report that we had a strong operating performance across most centers and consumption or retailer sales at our malls for the year closed at INR 11,344 crores, up 23% year-on-year.

Moving on to Slide 4. This slide provides a breakup of the performance and highlights the contribution from new malls during FY '24. EBITDA from the retail business for the full year came in at INR 1,672 crores, up 25% year-on-year. Overall existing operational malls saw full year rental income and EBITDA growing at about 6% and 7%, respectively. EBITDA margin as a percentage of rental income is at a healthy 104% of rental income.

New malls contributed approximately INR 295 crores in rental income and approximately INR 256 crores in EBITDA for FY '24. EBITDA margin as a percentage of rental income is lower in new malls during the initial period of occupancy ramp-up. However, going forward in FY '25, EBITDA margins from new malls should start moving towards the margins we see for our existing operational malls as these malls stabilize.

Let's go to Slide 5. We are seeing a fast ramp-up in the trading occupancy at our newly launched malls, Phoenix Citadel Indore launched in December 2022, crossed 90% occupancy levels within 12 months of launch and has been trading at a stable 91% occupancy still since then.

Palladium Ahmedabad launched in February 2023. This is on Slide 6. It's already trading at 86%. In fact, the multiplex at Ahmedabad is ready and once we obtained the occupation certificate, the multiplex will commence operations and the occupancy level will cross 94%.

Moving on to Slide 7. Phoenix Mall of the Millennium at Pune opened up -- opened in September 2023 and is already trading at 77% occupancy levels within 8 months of opening.

And on Slide 8, last but not the least, Phoenix Mall of Asia at Bangalore launched in October 2023, and is already at 67% occupancy levels within 6 months of opening.

Let's take a look at Slide 10. As we have noted earlier, total consumption in FY '24 was at INR 11,344 crores approximately demonstrating a year-on-year growth of 23% over FY '23. On a like-to-like basis, consumption in FY '24 grew by 8% over FY '23, led by strong double-digit growth in Phoenix MarketCity and Palladium Chennai. Phoenix MarketCity, Mumbai at Kurla and Phoenix Palassio Lucknow.

Phoenix Palladium reported a growth of 4% but if adjusted for the loss of contribution from the Lifestyle store, it reported consumption growth will be approximately 9% on a like-to-like basis. As you may all be aware, we have shut down that store and demolished that structure as per our revised approval plans to provide a spectacular entry and arrival experience and better circulation for the ever-growing iconic Phoenix Palladium development.

Gross retail collections for the period were approximately INR 2,743 crores, up 27% over FY '23.

Slide 11 shows total consumption in quarter 4 FY '24 was at approximately INR 2,833 crores up 28% year-on-year. And on a like-to-like basis, grew by 10% over Q4 FY '23. This is excluding the new malls, which were launched in the end of calendar year '23.

Slide 12 provides an overview of the category-wise consumption performance across our malls on a like-to-like basis.

Moving on to Slide 13. Rental income for the quarter grew by 31% over Q4 FY '23 driven by strong performances from Phoenix MarketCity, Pune; Phoenix market cities in Mumbai, Chennai; and Phoenix Palassio Lucknow.

The rental income performance is reflected in the EBITDA performance as well and on Slide 14, demonstrates a growth of 28% over Q4 FY '23.

Drawing your attention to Slides 15 and 16. Since we have discussed the FY '24 retail income and EBITDA performance, I will skip through these slides and go to the occupancy overview across major malls on Slide 17. Weighted average leased occupancy across major malls stood at 97% and trading occupancy at 88%.

Moving on to the Commercial Office section, which is on Slide 18, we have taken significant strides towards cementing our presence in this asset class as well.

Slide 19 demonstrates that for FY '24, total income from the office business was approximately INR 190 crores with an EBITDA of approximately INR 110 crores, depicting a growth of 12% and 13%, respectively, over FY '23. FY '24 gross leasing has been over 0.5 million square feet, out of which approximately 3.6 lakh square feet is new leasing and 1.7 lakh square feet is renewals.

Slide #20. Occupancy in our operational portfolio of Mumbai and Pune has increased to 70% at the end of FY '24, up from 63% last year, while maintaining healthy gross rental levels.

On Slides 21 and 22. In line with the performance in FY '24, income from the office business in Q4 FY '24 was at INR 49 crores, up 13% compared to the same quarter last year and EBITDA was INR 30 crores, up 12% over Q4 FY '23. We are hopeful to continue this momentum with the launch of best-in-class benchmark setting new age commercial office assets at Bangalore, Pune and Chennai in 2024, where we have seen keen interest from prospective clients.

Moving on to Slide #23 and the hotel assets. We continue to see positive trends in the hospitality segment with double-digit growth in ARRs along with high occupancy levels in both of our operational hotels.

Slide 24 shows that our marquee destination, The St. Regis, Mumbai, we have seen a remarkable ARR level at more than INR 21,000 in Q4 FY '24. Even for the full year of FY '24, there has been a notable increase of 23% in room rates while maintaining above 80% occupancy throughout the year.

Coming to the operational performance shown on Slide 25. St. Regis continues to reach new heights and has clocked total income of over INR 490 crores with EBITDA of approximately INR 223 crores representing an EBITDA -- an impressive EBITDA margin of 46%.

Slides 26 and 27. Moving on to the Courtyard by Marriott at Agra. We have seen double-digit ARR growth throughout the year with occupancy levels close to 80%. The operational performance, this asset has clocked a total income of INR 55 crores with EBITDA of INR 16 crores and healthy margins of 29%.

Let's move to the residential business, which is on Slide 28 and onwards. We've had another remarkable year during FY '24.

Slide 29 and 30 showed a strong demand and fast conversion, which -- where we've seen gross sales of approximately INR 566 crores and we've collected INR 646 crores during FY '24. Also, we are happy to report that we have received the occupation certificate for Tower 7 at One Bangalore West. Accordingly basis, sale of the completed inventory and on receipt of OC of Tower 7, we have recognized revenue of INR 870 crores for FY '24 and INR 454 crores during this quarter -- during the last quarter.

Moving on to the financial results for the quarter and year ended 31st March 2024. This is on Slide 31 and onwards. Slide 32 shows the standalone P&L, which houses Phoenix Palladium Mumbai, and a very small component of offices Phoenix House. Income from operations for Q4 FY '24 and full year FY '24 have been slightly lower than Q4 FY '23 and full year FY '23 as well. Mainly on account of ongoing enhancements to the overall layout, where we have vacated and demolished the structure which was housed the lifestyle store previously, and that has had an impact both on consumption and on our rental incomes.

Without spending too much time on the stand-alone balance sheet, we will move on to the consolidated performance on Slide #34. With addition of new operational assets and momentum in leasing and occupancy, our income from operations for Q4 FY '24 is higher by almost 80% compared to Q4 FY '23. For the full year of FY '24, income from operations is higher by about 50% compared to FY '23.

I would like to mention at this point that in FY '24, we have booked INR 870 crore of revenue in our residential business, which has been added to this and this demonstrates a boost in the top line. On our operating EBITDA metrics for the full year FY '24, we have reported INR 2,185 crores with an increase of 44% over FY '23. This momentum has been seen quarter-on-quarter with Q4 FY '24 clocking 46% growth in operating EBITDA over Q4 FY '23. Profit after tax after adjustment of minority interest and exceptional items, which was INR 1,152 crores for FY '24, grew by over 60% over FY '23.

Let's move on to the consolidated balance sheet, which has granular numbers, Slide #36. Our consolidated debt as on 31st March '24 is INR 4,366 crores, with an average cost of roughly 8.8%.

Let's draw your attention to Slides 37 and 38. On the consolidated cash flows front, we have crossed the milestone of INR 2,000 crores and generated net cash flow from operations of INR 2,162 crores net of taxes. We have reinvested considerable amount of this cash flow through capital expenditure across assets under development and 1 land acquisition during the year in total aggregating about INR 1,670 crores. As for perspective, after removing interest paid to service the existing debt, our operating free cash flow, net of taxes and interest is about INR 1,781 crores for FY '24, which is 27% higher than last year.

Slide 39 and Slide 40 show our group level net debt position has remained close to INR 2,200 crores as majority of our CapEx has been funded by operational cash flows. PML level net debt position has improved with net debt of INR 1,560 crores as on 31st March 2024.

Let's move on to Slide 41. Last month, in April, we have acquired 6.6 acres of land adjacent to Phoenix MarketCity, Bangalore, at a cost of about INR 230 crores. This has been acquired through our joint venture with the Canada Pension Plan and will add to the overall footprint and development potential, accessibility and experience for our destination retail-led mixed-use development Phoenix MarketCity located near -- on Whitefield Road in Bangalore.

On Slide 42, we have a clear road map of where we intend to be by 2027. We aim to have an operational portfolio of about 14 million square feet of retail, 7 million square feet of offices, close to 1,000 keys in hotels and add another 1 million square feet to our residential development. These are all projects which are already underway, have -- lands have been acquired and may be under construction or at design development stage.

As we have seen on the earlier slide, we are busy charting our growth beyond 2027 and have added to our development mix through land acquisitions at Thane and Bangalore. And we continue to evaluate and work on opportunities selectively to add to our growing portfolio.

Moving on to sustainability, Slides 43 and 44. Sustainability is a very important focus for our company. As we grow, we are committed to doing so responsibly and here's how. We are ramping up our use of renewable power across our entire portfolio, aiming for over 70%.

All our new buildings are targeted to be LEED-certified, ensuring they are environmentally friendly and efficient. We are already making strides on this front with 1/3 of our existing retail buildings, 1/3 by GLA are already certified with the USGBC LEED certification.

This brings me to the end of our operational and financial performance update, and we can now be open for questions.

[Operator]

[Operator Instructions]

First question is from the line of Parikshit Kandpal from HDFC Securities.

[Parikshit Kandpal, analyst]

Congratulations on a great quarter, sir. Shishir sir, my first question is on the same-store growth of 8%. If you can help us understand a little bit more on how has been the trading occupancy impact on this 8% volume growth and inflation?

[Shishir Shrivastava, executive]

Thanks for the question, Parikshit, let me try and answer it to the best of my abilities. If you look at our operating assets, several of our Phoenix MarketCitys continue to be at the lag end of the tenure with bankers. So for example, Phoenix MarketCity, Bangalore and Phoenix MarketCity, Mumbai at -- are about -- Phoenix MarketCity, Pune, both have anchor space, which is about more than 52%.

During the cycle of the malls life, or the tenure of the contracts, we'll continue to see opportunities to make these malls more efficient. What I mean by that is moving away from being anchor-heavy depending on where you are in the life of that mall, what the customer aspirations are and bringing in a new brand mix and perhaps new categories. So we did this in Phoenix MarketCity Mumbai, and we've seen a significant, I would say, in 1, 1.5 years the numbers have played out and we demonstrate how the strategy has worked for us.

So in several of our malls, we are now seeing that opportunity again in the next year and maybe 1.5 years. So that strategy will help boost consumption. So it's always important to refresh the category mix and brand mix.

I think we took some hit at Lower Parel as I mentioned during my notes during my opening remarks that with the Lifestyle block, being -- we generated close to INR 25 crores, INR 27 crores annual rent and significant consumption. We saw a drop in consumption in rent because the Lifestyle block was vacated and demolished to create a better experience for the ongoing development.

We are doing some fantastic work at Phoenix Palladium Mumbai, in expansion. There is a host of new brands that we are in discussions with. These are definitely going to aid in improving both consumption and overall rental income for us. So it's -- I don't think we are seeing any structural issue here, which is causing consumption to, let's say, be at a stable consistent level or show nondemonstrate grade growth. I think it's every mall in its life is -- has this opportunity of improvements every 3 to 5 years, and that's where we are in with several of our malls. So I think we are going to see this getting better.

[Parikshit Kandpal, analyst]

Sir, and guidance for next year, what kind of sales growth we are looking at?

[Shishir Shrivastava, executive]

Sorry, Parikshit can you repeat what you're saying.

[Parikshit Kandpal, analyst]

For these malls, which are like operational, like-to-like basis, what kind of growth do you think we can forecast for FY '25 versus 8% we have reported this year?

[Shishir Shrivastava, executive]

See, I don't want to -- I don't think it's fair to talk about FY '25 alone. I would say one has to always look at a 3-year CAGR and -- 3- to 5-year CAGR. And over a 3- to 5-year CAGR, I would estimate anywhere between 11%, 12% kind of a growth.

[Parikshit Kandpal, analyst]

Okay. Okay. And my second question is on Thane. So I mean you have acquired the land parcel. So any plans on what have you decided to do there? One of your competitors coming up with a hotel of 560-odd rooms keys. So any plans -- I mean, what are you looking to add there, do there in terms of -- you can help us in the mix understand as we commercial hospitalities what do you intend to do there?

[Shishir Shrivastava, executive]

Yes. I think -- well, we've not -- we don't -- we are not ready to announce what we're doing there yet because it's still not concluded. So we're going to take probably another 2, 3 months to perhaps decide. But it's seeming to be a large mixture development with a combination of maybe some retail, some hotel. We are trying to really determine if resi is the right way to go. I think that's where the question really is what's the best use on this land. So we will be very, very happy to announce as soon as we've taken a decision.

[Parikshit Kandpal, analyst]

Okay. Just last thing on the residential piece. So now we have [ seen ] we are increasing our overall developable area there by FY '27. So what kind of presales number do you think you can achieve on a more consistent and a steady basis so that, that portfolio, there's more visibility on growth. We didn't have any major launches besides the Bangalore one and it could still awaited. So how do you intend to build that portfolio over the next 3, 4 years? And what kind of pieces do you think you can achieve in that segment in 2 years' time? More on the road map of 3 years -- next 3 years there?

[Shishir Shrivastava, executive]

With Calcutta, we've secured a major approvals. This is going to be about 1 million-odd square feet of saleable area, right? We are awaiting -- we have applied for EC. So we are in the process of getting the approvals. I think we maybe about 6 to 8 months away from launch on this asset, okay? The micro market there seems to be very, very strong and stable. Our primary research is showing rates in that micro market to be in excess of about INR 18,000, INR 20,000.

We've already decided on what the product mix is going to be like in terms of the sizing of the apartments, configuration, et cetera. We have about INR 350 crores to INR 400 crores as our target in this year to sell the ready inventory, which we have in Bangalore between One Bangalore West and Kessaku. So I think that's a great target for us to chase another INR 400 crores this year.

We have -- total ready inventory is about INR 1,200 crores, of which in this year, we are targeting about INR 400 crores. We might -- we'll certainly work harder to deliver more than our target. We've taken some price hikes and the market has also accepted that well. And we're selling at about INR 24,000 per square foot plus plus compared to INR 15,000 plus plus in 2019. I think this would be our guidance for FY '25 that we're targeting to get about -- in to sell about INR 400 crores.

[Parikshit Kandpal, analyst]

And more on the longer term, like 3, 4 years, what kind of sales can this segment do for us like residential, can we use that INR 2,000 crore number with the addition of more projects over the next 2, 3 years?

[Shishir Shrivastava, executive]

So currently, we don't have any active plans on expanding on residential, Parikshit. We're not in any race to become a large residential developer. We have been very selective about the opportunities. And depending on the value at which we are able to buy land in mature, stable markets where absorption has been consistent, we will continue to look at those opportunities. But I can clarify that today, we are not actively looking at any residential growth new projects.

[Operator]

The next question is from the line of Praveen Choudhary from Morgan Stanley.

[Praveen Choudhary, analyst]

Congratulations on a very, very good result. Shishir, just a quick question for me. Can you talk about the competition in Tier 1 existing cities where you already have malls in terms of are you finding considering how good this business has been credible competition coming in?

And the second question is on Tier 2 cities. The return on invested capital, how are you thinking about it as you're going into newer cities. So far, you have obviously achieved that, but are you finding that you may not be or are you need to slow down if the returns are coming slower? How are you thinking about it is the question?

[Shishir Shrivastava, executive]

Thanks, Praveen. So let's talk about Tier 1 cities and competition in Tier 1 cities. See the -- we've seen a significant -- I would say, we are -- we continue to see a good growth of -- in our numbers in Tier 1 cities. It's a great business to be in. But it also requires a -- I think, a very large team, a lot of effort. Land has become very expensive. And especially in the locations where our malls are, land has become very expensive. So I think there are many factors which deter competition. We are conscious of the fact that there can be competition, anybody can come into these markets.

So our focus is on creating such experiential centers, which become dominant consumption centers. And I think with that approach, we continue to stay a little ahead of the game here. We don't see other developers building malls around our locations at present in any of the markets where we are. And we will continue to innovate, get bigger, better where we are. So that we are just always established as a dominant center.

Your second question was return on capital invested in Tier 2 cities. In fact, I must say that return on capital in percentage terms, I would say, have been even better than Tier 1. Because these are not really -- they may be Tier 2 cities, but they are Tier 1 opportunities. Case in example, Lucknow within 6 years of acquisition, we are seeing a yield on cost of about 17% and growing every year.

And Indore, Ahmedabad, these also look to be very, very promising. We are very keen to work -- go ahead full steam on our project at Surat and is progressing fast. We expect to see the same story that play out in Lucknow -- played out in Lucknow to also play out in Surat, which is a great market to be in. Ahmedabad, I would like to say that in the first full year of operations, our yield has exceeded 14%. So that's great.

[Praveen Choudhary, analyst]

That probably makes sense. I did go to your Ahmedabad mall. It's actually fantastic. I have 1 more question, if it's okay. I was looking at your Slide #12 and you have category-wise growth in your consumption. So you look at electronics showing minus 1% or others showing 3%, food and beverage slightly lower. How are you thinking about it? Of course, you can't have a mall which has 0 percentage of these categories, but how do you ensure that you keep pruning it and improving that trade mix?

[Shishir Shrivastava, executive]

Yes. That's, I think, pruning and correcting the category mix and the brand mix, I think this is a very routine for us. This is how we manage our retail business. It's something that we do, I think virtually every day, right.

Looking at electronics specifically, I think it's a blip for that 1 year. And I would think maybe it's -- interestingly, last year, we did an electronics fest, which really, really worked well. I think this was done in Bangalore and Chennai and we saw great turnout for that. So there are these marketing initiatives that we create for specific categories to boost their sales. And we are not seeing electronics really not getting customers. It's not like customers have moved away from coming into physical stores and started ordering online to the extent that impact these physical stores.

According -- I think we remain very vigilant on the performance of each of the categories, and we continue to take corrective action, be it marketing, be it engaging with them, launching some kind of a special -- I would like to talk a little bit about F&B. F&B in our newer malls, we've significantly increased the percentage of gross usable area occupied by F&B. In the new malls, we may be in about 15%, 16% range for F&B alone.

And then you add that family entertainment centers, multiplex and entertainment options, you're inching closer to about 30%. This is a very, I would say, strategic shift where F&B and entertainment would earlier occupy cumulatively about 15%. Now we are inching closer to about 30%. Even in our new existing malls, we are working on an upgrade to revamp uplift F&B brands and auctions, right. So I think this drives the relevant profile of the customer also to the mall and drives overall consumption.

[Praveen Choudhary, analyst]

Congratulations, indeed very well done.

[Operator]

[Operator Instructions]

The next question is from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, analyst]

Yes. My first question was on what is the development plan for the 6.6 acres of land that we have bought in Bangalore?

[Shishir Shrivastava, executive]

Kunal, this land is adjacent to our existing Phoenix MarketCity development and which is -- which sits under the joint venture with CPP, an SPV called Island Star. So now this is exactly adjacent to that. We have the ability -- we are looking at how we can amalgamate the 2 land parcels and be able to utilize the overall development mix in a composite manner, so it has a -- I would say, the land parcel has a development potential, including TDR of about 1.3 million, 1.4 million square feet. We have -- at our existing development, we have our development potential, including TDR of 3 million square feet. And we are expanding the existing mall and existing mall developments. As you are aware, we're adding a 400-room hotel Grand Hyatt.

We have plans to add about 1 million-odd square feet of offices. So this acquisition will help us create a much larger destination with more -- perhaps more retail and more entertainment and F&B options. And we also have the ability to evaluate our stand-alone resi development should we want to take that up. The rates seem to be fairly reasonable in that area, I mean, viable in that area, profitable in that area and in the range of about INR 15,000 a square foot. So that is also under consideration. We are working on several options now. We've -- since we've recently acquired this, I think we maybe about 2 quarters away from deciding how we want to proceed with that -- with the development here.

[Kunal Lakhan, analyst]

Sure. Just -- I mean, just a few thoughts there. I mean, generally, this is very kind of uncharacteristic of us, right, in terms of like we -- in the past, we've generally been very clear about what we want to do. And then in fact, like we paid top dollar and bought land and built malls and then those malls have been pretty strong in terms of profitability and returns. Whereas, this is again, like very similar to what we are doing in Thane also where you bought land, but we are not sure what we are going to build over there.

Any change in the thought process or strategic thinking that versus -- what we used to be doing in the past versus what we are doing today?

[Shishir Shrivastava, executive]

Yes, so with this Bangalore 6.6 acres, it was an opportunity that we had to close very fast. It came up in our discussions with the land owners. And we didn't really get an opportunity to deep dive into finalizing a development mix. Of course, we ran our numbers basis and a base case. But we are trying to see how we can improve on that base case. And it's a little complex because it's a -- if the property is immediately adjacent from us -- adjacent to us. We have this existing mall. We are already constructing the multilevel car park and the office towers on top of that, which are closer to the boundary of this adjacent land parcel.

So we are trying to figure out what is the most efficient and I would say what is going to be the best experience for a customer here in terms of circulation, et cetera. So it will undergo a little bit of -- some -- it requires a lot of thought. But nevertheless, we feel that it's a huge, huge value add to this development. The ability to add another 1.3 million, 1.4 million square feet to this development, perhaps even going up higher is a huge value add to our overall destination.

[Kunal Lakhan, analyst]

Sure, sure. Just 1 follow-up on that in terms of like we are looking at, like you give an example of Bangalore also that you may look at adding some retail space also over there, and we are already doing some expansion at the Palladium Mumbai in terms of retail space. Overall our earlier strategy was like build these like 1 million square feet of retail was like the sweet spot. But do you think that, that thing is changing now, like there is potential of building larger scale malls. And we're seeing that with some of your competitors also who are building like huge malls, especially in North?

[Shishir Shrivastava, executive]

No absolutely. We -- I think the sweet spot has moved up recently because of the demand from retail brands and so many new global brands entering into the country. It's becoming -- I think the sweet spot now is closer to about 1.4 million, 1.5 million square feet. And that's the goal of our expansions across all locations where we have malls operating and also the new malls that we're building.

[Operator]

[Operator Instructions]

The next question is from the line of Parvez Qazi from Nuvama Wealth.

[Parvez Qazi, analyst]

Congrats for the great set of numbers. 2 questions from my side. First, in terms of our trading occupancy, which currently is at about 88%. Would it be fair to assume that, let's say, by the end of FY '25, this number would have moved to somewhere closer to the mid-90s at a portfolio level?

[Shishir Shrivastava, executive]

Yes, absolutely. Because there are so many deals done and concluded and under various stages of sale, I think we should be in 95%, 96% range for sure.

[Parvez Qazi, analyst]

Sure. And my second question is regarding the -- our various office assets. It would be great if you could tell us about the status of the construction there and when do we expect the various assets to become operational.

[Shishir Shrivastava, executive]

So Asia Towers, Bangalore is nearly complete. We are waiting for the OC. And we should be able to commence operations immediately thereafter. Phoenix Millennium Towers at Pune Wakad, these will be ready by the end of this year -- calendar year, Chennai as well. So we are estimating within the next 6 months, both of these -- at least Phase 1 of Millennium Towers Pune will be ready before the end of this calendar year, which will be about 0.5 million square feet.

Chennai, 0.5 million square feet should be ready by the end of this calendar year. The offices that we are building in Mumbai as part of our flagship development at Lower Parel. We expect this to be completed sometime in FY '27. And yes, at Bangalore, the 1 million -- about 400,000 square feet of new offices at Phoenix MarketCity, Bangalore on Whitefield Road be ready by 2026 -- calendar year '26.

[Parvez Qazi, analyst]

Got it. And I mean, apart from the 2 acquisitions that we have done in Thane and Bangalore, how is our business development, et cetera, plans for new retail asset development, whether in Tier 1 or Tier 2 cities from here?

[Shishir Shrivastava, executive]

I think there are probably 2 more real transactions that we are currently pursuing, and we should be able to conclude them in this calendar year. So that would add maybe another 2 million, 2.5 million to our portfolio in the next 4 years or 4 to 5 years. I had previously guided to closing 4 to 5 transactions within 24 months. This was in the last quarter call. I think the Bangalore acquisition was the first one. And there are 2 more which are underway. So I think give us a couple of quarters to be able to announce more.

[Operator]

The next question is from the line of Atul Mehra from Motilal Oswal.

[Atul Mehra, analyst]

Congratulations on good results. My question is on the retail expansion. So I think in the presentation, we've spoken about 11 million square feet going to 14 million square feet. So the question was in terms of given our very successful in terms of response so far on that at Ahmedabad and Lucknow you spoke about. Can we look at the next 2 to 3 years to build a very, very large pipeline like targeting 20 million plus in retail because what tends to happen is every city will tend to have a potential destination that will prosper over the next decade, right?

And if we don't take that opportunity some of our competitors might go in there and which would mean that once they have an established asset, it would not give us that opportunity because obviously, like there is a limit to how much land space a city can absorb. So structurally, given also that we have a very strong balance sheet today and cash flows are very strong. Can we look at stepping up the growth agenda on retail?

[Shishir Shrivastava, executive]

I think Atul if the estimate is to get about -- to have a pipeline to target about 20 million square feet in the next few years, I think, of course, we are already at 14 million square feet with the 2, 3 acquisitions that we are considering right now plus the development at Thane plus the extensive expansion that we're doing everywhere. I think we laid that 20 million much sooner. And we continue to look for opportunities, selectively in key markets.

So like I mentioned to you, I don't know if you remember this, but way back in 2017, we had told you what our portfolio is going to be [ whether we will get 13 ] million square feet by 2023. And we're going to make sure that we add another 1 million square feet every year. So we are very -- I think we are well on track on delivering that and perhaps more.

[Atul Mehra, analyst]

Right. Got it. That's good enough.

[Shishir Shrivastava, executive]

And now we are shifting gears also, of course, we will be very selective, but we are looking at each development being that 1.5 million plus. So as I mentioned in my response to...

[Atul Mehra, analyst]

And henceforth like when you're looking at setting up -- is the template going to be 1.5 million for all new assets that you look to acquire? Or it depends on like you have done in the past, the phase-wide development and maybe looking at building on asset at a later stage.

[Shishir Shrivastava, executive]

It depends on -- see now when we acquire land, mostly the sizing is such that you have the ability to develop much more. Even the development regulations in all cities have changed. The FSI available is more. But depending on the demand in any particular market, we will decide on the size. And we always have the opportunity for future expansion, which we plan for right upfront. So the new development in Bangalore, for example, is which is a Mall of Asia, Pune Mall of the Millennium, we have also completed, we're building the mall and office at the same time.

So earlier, we used to build the mall and wait a few years but because the market is ready at these locations for the office asset class, we've decided to go ahead up front. It's going to be customized. But yes, the sweet spot for retail in Tier 1 is definitely about 1.5 million. We will -- but depending if -- for example, if we look at a smaller town, we may not choose to build 1.5 million upfront. We may build only 800,000 and then keep our second phase development potential.

[Operator]

The next question is from the line of Prem Khurana from Anand Rathi.

[Prem Khurana, analyst]

Sir, I mean, just if you could talk about the Indore asset [indiscernible] in detail because and then in terms of trading density seems to be not there. I mean generally when I compare with most of these other assets that we have, and most of these that should be closer to INR 1,000-odd sort of number on trading density side and even likes of Lucknow and the recently commissioned Pune and all that. But this is more closer to INR 600 odd. So are we happy with this number? Or is it in line with your expectation or it's slightly lagging our expectation?

[Shishir Shrivastava, executive]

Okay. I would think that overall, what we have underwritten when we acquired this land in terms of rental income, I think we are probably there already, almost there. In terms of trading density, INR 600 per square foot per month, you're right. But then we must also understand that the retailers' cost is lower because rentals are lower. So if you look at the occupancy cost compared to a mall, which is at INR 2,000, INR 2,300 compared to Indore, which is at INR 600. The occupancy cost is much lower.

Yes, there is a lot of effort to be put into -- it's already established, I would say, as a great destination but we have to put in a lot more effort in bringing in great F&B options and driving other marketing activities, et cetera, to drive the right profile of customer there.

Rent is averaging, as I mentioned earlier, at these malls at about -- at this mall at about INR 79, all the other malls are averaging at about INR 150 or even higher. So for our model, what we've spent in acquisition and incremental cost of construction at INR 750 crores. I think we are already at an EBITDA of about INR 85 crores, INR 86 crores for the year. This is an 11% yield. And we are quite confident it will take -- maybe it will take another 2 quarters for the -- for our strategy to play out and for the consumption to start growing here.

[Prem Khurana, analyst]

Sure. So I think in terms of monthly rental rate that you're charging, I mean, I agree it's lower in some of these other malls. But I mean, if I were to look at it from -- so eventually, when I look at a retailer, they tend to have their cost structures in place and how much do they intend to share with you in terms of CAM and rental rate?

And what would you believe is the ideal number for retailer, for example, I mean, for Indore it works out to 20-odd percent sort of number? Palladium, I can understand it's a destination of most people who would be willing to pay you more than 20%, 25%, just to be able to have presence there. But generally speaking, whenever you're evaluating, what sort of number do you tend to kind of bake in into your estimates to understand whether the mall would find bake as enough.

[Varun Parwal, executive]

Prem, Varun this side. So staying that question on Indore, I think, 1 thing that does not come out when you look at or retain more is the tenant mix that you have with each center. So Indore, for example, has today lower anchor area than what you would see even in Kurla or Pune or Bangalore that has been a very conscious strategy. Driving more in-line centers and creating more space for F&B and family entertainment centers actually tries a stickier profile of the grade A consumers that we are targeting.

And because the anchor area is lower in area in Indore, cost of occupancy can actually be higher than what you may see for established centers like a Phoenix MarketCity in Bangalore or a Pune or Chennai, which are at about 13%, 14% of rent to consumption.

[Operator]

The next question is from the line of Mohit Agrawal from IIFL Securities.

[Mohit Agrawal, analyst]

Congratulations to your team for a great performance. My first question is, you talked about Tier 1 malls. So just for your expansion in Tier 1 metro cities, we have so far taken the Greenfield Group for constructing new malls. But for -- given the land availability issue, would you be open to or have you considered exploring the Brownfield or acquiring existing malls and turning them around? And would your valuation expectations be very different, different when you're acquiring a Brownfield mall? That's my first question.

[Shishir Shrivastava, executive]

Yes. I think, generally, we look at Greenfield developments resulting in a stabilized yield, let's say, in the third year or fourth year of operation. we look at trying to be closer to 18%, 19% kind of a yield on cost. So that's where we find the real value for us. Buying operational malls, a, the opportunities are very, very few because there aren't too many great malls that meet our specs for us to acquire. We are always open to acquiring brownfield assets.

Brownfield assets also our experience with, let's say, Lucknow has been fantastic where we acquired it at a great price, and we were able to take it to completion in a very short span of time and make the mall operational. So we are open to brownfield. Greenfield is clearly what we do. Operating malls, as I mentioned, there aren't too many assets that we can look to buy the ones which are -- which were available for sale have already been purchased by several of the funds, as you know, the REITs and the returns are very, very low. So that's really not our principal strategy.

[Mohit Agrawal, analyst]

Okay, understood. That's clear. And secondly, on the commercial bid, you gave time lines on the completion. So between Bangalore Millennium Towers in Chennai, in the next 6 months, we have almost roughly about 1.5 million square feet to 2 million square feet of space coming up. What is the leasing pipeline looking like in these assets?

[Shishir Shrivastava, executive]

So this is about 1.6 million square feet. We have started the soft leasing at Asia Towers, Bangalore. And I think we have -- there's been a lot of interest. We've seen -- despite North Bangalore being a slightly soft market, we've seen a lot of inquiries and interest in this asset. I think we'll see a great traction as we get our OC in place in the coming months. Pune Millennium Towers and Chennai, we have not yet started leasing, but we have started inviting potential leads. And again, I would say there's a reasonably good inbound interest from a lot of tenants in both these markets.

[Mohit Agrawal, analyst]

Congratulations to Mr. Gupta on joining the team, looking forward to interact with you.

[Kailash B. Gupta, executive]

Thank you so much.

[Operator]

Thank you. As that was the last question, on behalf of The Phoenix Mills Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.