IPO Note - Brookfield India REIT Ltd By Ventura Securities
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Initial Public Offering
The Brookfield India Real Estate Trust (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 ~USD 575 billion in assets under management, as on 30th September 2020, their goal is to be the leading owner of high-quality income producing commercial real estate assets in key gateway Indian markets, which have significant barriers to entry.
The REIT’s Initial Portfolio comprises 14.0 msf, with rights to acquire a further 8.3 msf and rights of first offer on an additional 6.7 msf, both currently owned by members of the Brookfield Group. In line with its strategy and business plan, the REIT owns an Initial Portfolio of 4 large campus-format office parks, which it believes are “business-critical”, located in some of India’s key gateway markets - Mumbai, Gurugram, Noida and Kolkata.
The REIT’s 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 is 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 Weighted Average Lease Expiry (WALE) provides stability to the cash flows from its Initial Portfolio, it is well positioned to achieve further organic growth through a combination of contractual lease escalations.
The REIT has observed a revenue growth of 7.9% CAGR to Rs. 956.7 cr for the period FY18 to FY20. For the same period, EBITDA grew by 4.5% CAGR to Rs. 593.6 cr, whereas EBITDA margins declined from 66.2% in FY18 to 62% in FY20 on account of increased expenditure. Going forward, the company aims to deliver a yield of 7.95% (FY22) and 8.43% (FY23) aided by operating revenue growth of 20% between FY20-FY23, driven by contracted rent escalations, lease-up of vacant area, re-leasing of existing areas and lease-up of Under Construction Area.
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