Brookfield India Real Estate Trust IPO Opens Today: Here's All You Need to Know

Brookfield India Real Estate Trust, which is the only 100 percent institutionally-managed public commercial real estate vehicle in India has opened its initial public offering (IPO) for subscription on Wednesday with a price band at Rs 274-275 per unit.

The issue is likely to close on Friday, Moneycontrol reported.

Brookfield India Real Estate Trust owns an initial portfolio of 4 large campuses – format office parks, which are ‘business critical’ in Mumbai, Gurugram, Noida and Kolkata. Its initial portfolio consists of 14.0 million square feet (msf) of which 10.3 msf is completed, 0.1 msf area is under construction along with 3.7 msf of future development potential.

Brookfield REIT will be the third listed trust in India if it is successfully subscribed. The first one Embassy Office Parks REIT, backed by Blackstone and Embassy group, got listed in April 2019 after raising Rs 4,750 crore.

Its initial portfolio’s completed area has same store commitment occupancy of 92 percent (and a 87 percent Committed occupancy, which includes the recently completed 0.5 msf at Candor Techspace N1) and leased to marquee tenants with 75 percent of Gross Contracted Rentals contracted with multi-national corporations such as Barclays, Bank of America Continuum, RBS, Accenture, Tata Consultancy Services and Cognizant.

Its 7.1-year weighted average lease expiry (WALE) provides stability to the cash flows and is well positioned to achieve further organic growth through combination of contractual lease escalations, 36 percent mark-to-market headroom to in-place rents, lease-up of vacant space and near-term completion of under construction area to meet tenants’ expansion needs.

Brookfield REIT, the country’s only 100 per cent institutionally managed public commercial real estate vehicle, is issuing units aggregating up to Rs 3,800 crore. It is offering 14 million square feet of its commercial portfolio in the REIT. The net proceeds from the public issue will be utilised for partial or full pre-payment or scheduled repayment of the existing debt of Asset SPVs (special purpose vehicles).

At higher end of unit price of Rs 275, it is available at steep discount of 11.6 percent to its NAV per unit as of September 2020 which stands at Rs 311 NAV per unit, the brokerage feels.

“As of December 14, 2020 its peers Embassy office Park REIT and Mindspace Business Park REIT were trading at discount of 5.3 percent and 3.0 percent respectively of its NAV per unit. Brookfield at 11.6 percent discount of its NAV per unit provides a comfort to its valuation. Thus, we recommend a subscribe rating for the IPO,” KR Choksey said.

Brookfield REIT is sponsored by an affiliate of Brookfield Asset Management (BAM), one of the world’s largest alternative asset managers with approximately $575 billion in assets under management, as of September 2020.

Brookfield REIT would be managed and sponsored by one of the largest real estate investors in the world, with a decade long track record in India. Its manager has grown their net operating income (NOI) from Rs 590.24 crore for FY18 to Rs 676.34 crore for FY20. Their NOI was Rs 344.69 crore for the 6 months ended September 2020.

The company is going to raise Rs 3,800 crore via maiden public offer, of which Rs 1,710 crore has already been mopped up from anchor investors on February 2. The proceeds from the issue will be used for debt repayment of Asset SPVs.

“Post the utilisation of the net proceeds from the Offer, their total outstanding indebtedness in principal amount is expected to be less than 18.5 percent of their initial market value, providing them significant financial flexibility to grow through economic cycles,” said Sharekhan.

At Rs 275 per unit, “it is expected to give pre-tax yield of 7.95 percent in FY22 and 8.43 percent in FY23. However, the payout of the first year will have 85 percent interest component (taxable in hands of investor) and 15 percent dividend (tax free). The interest component will be reduced over a time as the dividend component increases,” said the brokerage.

Brookfield REIT did not face significant disruptions in their operations due to COVID-19 during the financial year 2020 and the 6 months ended September 2020. They collected 98 percent, 98 percent, 99 percent, 99 percent, 97 percent and 98 percent of the gross contracted rentals for the months of April, May, June, July, August and September 2020, respectively.

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