5 Reasons to invest in Brookfield REIT IPO.

So far, on the second day of bidding on Thursday, Brookfield India Real Estate Trust's initial public offer (IPO) was subscribed by 20.89 percent, driven largely by corporate and individual investors.Applications for 1,62,42,600 units were received by 11:45 am. 44 percent of the quota allocated for retail and corporate investors was subscribed, and 0.03 percent for institutional investors.  As they usually bid for every IPO on the last day, the low turnout of institutional investors is in line with normal patterns. The REIT problem for Brookfields, which is the third REIT ever to be introduced in India, is scheduled to close on Friday. 

Details of Brookfield REIT IPO:- 

5 Reasons to invest in Brookfield REIT IPO:-

Client Profile -

75% of Gross Contracted Rentals contracted with multi-national corporations such as Barclays, Bank of America Continuum, RBS, Accenture, Tata Consultancy Services, and Cognizant. This provides comfort in the client's position and stability in future cash flows.

Promoter support -

The Brookfield REIT is India’s only institutionally managed public commercial real estate vehicle. Sponsored by an affiliate of Brookfield Asset Management (“BAM”), one of the world’s largest alternative asset managers with approximately US$575 billion in assets under management, as of September 30, 2020.

Highest Collection Efficiency –

The REIT was not as impacted by the COVID lockdown due to the quality of the client profile. The rent collections were always higher than 98%.

Stable Quarterly Payouts –

The indicative yield as per FY22 NCDF (Net Distributable Cash Flows) is 8.22% on a pre-tax basis. The interest income will be taxed as per the applicable tax rates, and dividend income is exempt from tax.

Reasonable Valuations -

Embassy Office Parks REIT and Mindspace Business Park REIT are trading at a 5.3% and 3% discount to their NAV respectively. At the higher end of the unit price of INR 275, it is available at a steep discount of 16% to its NAV/ unit as of 30th September 2020 which stands at INR 311 NAV/ unit.  

Latest Subscription status of Brookfield REIT IPO:- 

Brookfield India REIT subscribed 0.75 times. The public issue is subscribed 0.53 times in QIB, and 0.91 times in the NII category by Feb 4, 2021, 04:59.

Date wise subscription status:- 

Brookfield India REIT is a public issue of 76,278,200 equity shares. The issue offers 41,605,400 shares to qualified institutional buyers, 34,672,800 shares to non-institutional investors.

Company profile:- 

The Brookfield REIT is India’s only institutionally managed public commercial real estate vehicle. Sponsored by an affiliate of Brookfield Asset Management (“BAM”), one of the world’s largest alternative asset managers with approximately US$575 billion in assets under management, as of September 30, 2020. Initial Portfolio comprises 14.0 MSF (10.3 msf completed area, 0.1 MSF of under-construction area, and 3.7msf of future development potential. It has rights to acquire a further 8.3 MSF and rights of the first offer on an additional 6.7 MSF, both currently owned by members of the Brookfield Group. 

• Located in some of India’s key gateway markets - Mumbai, Gurugram, Noida, and Kolkata.
• Committed Occupancy of 92%.
• 75% of Gross Contracted Rentals contracted with multi-national corporations such as Barclays, Bank of America Continuum, RBS, Accenture, Tata Consultancy Services, and Cognizant. 
• 7.1-year WALE provides stability to the cash flows of the Initial Portfolio.
• Initial Portfolio’s NOI is projected to grow by 25% (net of one-time adjustment) to 8,186 million in FY 2023.

Global Sponsorship with Local Expertise

Brookfield’s extensive network of relationships, its deep capital markets experience, operating expertise, a demonstrated track record of managing capital, and its commitment to the resource will be beneficial for unitholders.

Internal and External growth opportunity:

Brookfield real estate assets have two sources of growth –

• 1) Through opportunities to increase NOI from Initial Portfolio
• 2) Acquisition of additional properties

Identified Assets and ROFO Properties combined, creates the potential for us to almost double the Initial Portfolio’s Leasable Area to 28.9 MSF.

Difficult to Replicate, Dominant, and Strategically Located Properties:

Size and scale in key markets of India provide Brookfield with extensive market information and enhances the ability to respond to market opportunities. On a cost-competitive basis, it is very difficult to replace these office parks as all the four office parks are among the largest in their micro-market and are distinguished by their scale and infrastructure. 

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Source:-Economic times. GEPL research team.