About the company 

The Brookfield REIT has been settled by its Manager (solely as the settlor, on behalf of its sponsor) for the initial contribution. It was settled on July 17, 2020 at Mumbai, Maharashtra, India as a contributory, determinate and irrevocable trust under the provisions of the Indian Trusts Act, 1882, pursuant to a trust deed dated July 17, 2020. Pursuant to the Formation Transactions, its Initial Portfolio is proposed to be acquired and held by the Brookfield REIT through their Asset SPVs. Their initial portfolio totals 14.0 msf, comprising 10.3 msf of Completed Area, 0.1 msf of under-construction area and 3.7 msf of Future Development Potential. The company intends to leverage Brookfield Group’s real estate holdings in India by entering into agreements that provide options to acquire their existing properties in their markets. Brookfield REIT has the exclusive right and option at its discretion to acquire the Identified Assets, encompass 8.3 msf of office space. In addition, they will also benefit from rights of first offer on the ROFO properties - the Brookfield Group’s 100% owned commercial real estate assets in India’s financial capital, Mumbai, comprising 6.7 msf in office space. The initial portfolio, identified assets and ROFO Properties combined, create the potential for them to almost double their initial portfolio’s leasable area to 28.9 msf.

Board of Directors 

Akila Krishnakumar is an independent director of the Manager. She is an experienced professional with a long industry standing, including over 18 years of experience in the field of technology. She is currently on the board of Heidelberg Cement India Ltd., Matrimony.Com Ltd, IndusInd Bank Ltd. and ABB Power Products and Systems India Ltd. Shailesh Vishnubhai Haribhakti is an independent director of the Manager. He is an experienced professional in the field of finance and accounting. He is the founder and chairman of New Haribhakti Business Services LLP, since 2013. He is also currently the chairman of Blue Star Limited and on the board of directors of L&T Finance Holdings Ltd, L&T Mutual Fund Trustee Ltd. and Ambuja Cements Ltd. Anuj Ranjan is currently a non-executive director of the Manager. He is a part of the senior leadership of BAM and is the managing partner and chief executive officer of South Asia and Middle East for BAM and is responsible for overseeing the investment initiatives and operations of Brookfield in these regions. He joined the Brookfield Group in 2006 and has held various positions in the organisation over the years. Ankur Gupta is currently a non-executive director of the Manager. He is the managing partner, country head – India (real estate) at the Brookfield Group and is responsible for overseeing the investments and operations of the Brookfield Property Group in India. He joined the Brookfield Group in 2012 and has worked on Brookfield Property Group’s transactions spanning across India and North America. 

Key management:-

Alok Aggarwal is the managing director and chief executive officer – India office business of the Manager. He heads all aspects of the business of their Manager including design, development, strategic initiatives, finance, corporate strategy, leasing and tenant relationships. He has over 29 years of experience in managing projects, business development and overseeing operations and investments of entities in the real estate sector. Prior to joining the Brookfield Group, he has worked at Milestone Capital Advisors Ltd., SunAres India Real Estate Advisors Pvt. Ltd., Hindustan Prefab Ltd., DLF Universal Ltd., Delta Mechcons (I) Ltd., TCG Urban Infrastructure Holdings Ltd. (a Chatterjee group company) and Mahindra Gesco Developers Ltd. Sanjeev Kumar Sharma is the Executive Vice President and Chief Financial Officer – India office business of the Manager. He has previously worked at Apollo Tyres Ltd, Galaxy Mercantile Pvt. Ltd. (currently owned by Embassy Office Parks REIT), JK Paper Ltd, ICICI Bank Ltd, Quippo Construction Equipment Ltd and BPTP Ltd. He has over 26 years of experience in finance, accounts and taxation. At their Manager, he heads various aspects of finance including fund-raising, mergers and acquisitions, business strategy, investor relations, reporting under accounting standards, controllership, budgeting and taxation.

Objects of the issue 

 1) Partial or full pre-payment or scheduled repayment of the existing indebtedness of its Asset SPVs 3,575cr

 2) General Corporate purposes .

Portfolio Overview 

Company’s initial portfolio comprises 14 msf, with 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. The Brookfield REIT owns an Initial Portfolio of 4 large campus - format office parks, which are “businesscritical”, located in Mumbai, Gurugram, Noida and Kolkata. Its initial portfolio totals 14 msf, comprising 10.3 msf of Completed Area, 0.1 msf of under-construction area and 3.7 msf of future development potential. Their initial portfolio’s completed area has a same store committed occupancy of 92% (and a 87% Committed occupancy, which includes the recently completed 0.5 msf at Candor Techspace N1) and leased to marquee tenants with 75% of Gross Contracted Rentals contracted with multi-national corporations such as Barclays, Bank of America Continuum, RBS, Accenture, Tata Consultancy Services and Cognizant. While a 7.1 year WALE provides stability to the cash flows of its Initial Portfolio, they are well positioned to achieve further organic growth through a combination of contractual lease escalations, 36% 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. Currently, the near-term completion of construction is de-risked as a majority of it has received the occupation certificate and the balance has achieved full financial closure with key approvals in place and expected completion by September 2021. These factors create a strong foundation for organic cash-flow growth, such that its initial portfolio’s NOI is projected to grow by 25% (net of onetime adjustment) to Rs818.6 crore (including CIOP), over the projections period ending in FY2023. These NOI drivers will contribute to an increase in the value of the underlying properties and the potential to produce attractive returns for its unitholders.

Business update:- 

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 30, 2020. They collected 98%, 98%, 99%, 99%, 97% and 98% of the gross contracted rentals for the months of April, May, June, July, August and September 2020, respectively. As on September 30, 2020, the Committed Occupancy, Same Store Committed Occupancy and in-place rent of the Initial Portfolio was 87%, 92% and Rs.62 psf/month, respectively.

Valuation and view:-

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. The REIT has initial portfolio of 14msf with same store committed occupancy of 92%, WALE of 7.1 years and 36% mark-to-market potential. It has identified assets of 8.3msf and ROFO agreement for 6.7 msf totalling 15 msf. At Rs. 275 per unit, it is expected to give pre-tax yield of 7.95% in FY2022 and 8.43% in FY2023. However, the payout of the first year will have 85% interest component (taxable in hands of investor) and 15% dividend (tax free). The interest component will be reduced over a time as the dividend component increases

Key Risks:- 

Distribution risk The Manager does not provide any assurance or guarantee of any distributions to the unitholders. It may not be able to make distributions to unitholders in the manner described in the Offer Document or at all, and the quantum of distributions may decrease. COVID-19 risk The extent to which the COVID-19 may affect Brookfield REIT’s business and operations in the future is uncertain and cannot be predicted. 

Commercial market risk 

The business and profitability is dependent on the performance of the commercial real estate market in India. Fluctuations in general economic, market and other conditions may affect the commercial real estate market in India and in turn, its ability to lease office parks to tenants on favourable terms.

Tenant concentration 

The 10 largest tenants accounted for 75%, 74%, 77% and 77% of the leased area, as on September 30, 2020, March 31, 2020, 2019 and 2018, respectively. Of these, three tenants, Accenture, Tata Consultancy Services and Cognizant accounted for 17%, 17% and 14%, respectively, of the leased area as of September 30, 2020. 

Sector concentration 

The tenants in the technology sector accounted for 50%, 48%, 50% and 49% of the leased area of the initial portfolio, as on September 30, 2020, March 31, 2020, 2019 and 2018, respectively. 

Related-party transactions risk 

The Brookfield REIT, its Asset SPVs, CIOP, its manager and its sponsor have entered into several relatedparty transactions, which could potentially pose a conflict of interest. 

Portfolio valuation risk

The valuation report on the initial portfolio is only indicative in nature as it is based on a set of assumptions and may not be representative of the true value of the initial portfolio. 

Regulatory risk 

Laws governing REITs in India are in their early stages and relatively untested. Any future changes in regulations, interpretation and enforcement may reduce the attractiveness of the units to prospective investors.

Brookfield India Real Estate Trust

Issue Period

Bid/Offer Opens On:  Wednesday, 3rd February, 2021

Bid/Offer Closes On: Friday, 5th February, 2021

Issue Details

Fresh issuance of Units aggregating upto ₹ 3,800 Cr

Issue Size (₹ Cr)

₹ 3,800 Cr

Price Band

₹ 274 – 275

Bid Lot

200 Units  and in multiple of 200 units thereafter for Non-Institutional Investors

Institutional Investors

75% of the offer (  ~10.36 Cr Units) (₹ 2,850 Cr))

Non Institutional Investors

25% of the offer (  ~3.45 Cr Units) (₹ 950 Cr)

 

Based on Upper Price Band

Registrar

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