Buy Brookfield India Real Estate Trust Ltd For Target Rs. 330 By JM Financial Services
Brookfield India REIT (BIRET) reported a strong quarter as NOI grew 13% YoY to INR 4.9bn, led by healthy growth in lease rentals and CAM revenue due to increase in occupancy by 500bps over the last 12 months. During the quarter, BIRET recorded gross leasing of 0.65msf at 22% re-leasing spreads. Occupancy improved ~70bps to 89%, as 0.65msf of new leasing and renewals was offset by 0.4msf of exits (mostly at Downtown Powai). The portfolio currently has occupancy of 89% and the management is targeting to take it to c. 93% by year-end. We expect BIRET to deliver 11%/13% NOI/NDCF CAGR over FY25-FY28E aided by the improving leasing momentum as the outlook for the commercial office sector improves further. We maintain a BUY rating with a revised Mar’26 TP of INR 330 (11.5% total return; 4.5% capital appreciation; 7.0% dividend yield). Key risks include: (i) broader macroeconomic slowdown and (ii) reversal of demand trends from GCCs.
* Healthy leasing performance continues: Total area under lease increased to 21.7msf (vs. 21.5msf in 4QFY25) as BIRET achieved 0.65msf of gross leasing (0.60msf of new leasing + 0.05msf of renewals; c.78% leasing at its SEZ assets) with 22% spread in rentals. The portfolio has a well-staggered lease expiry profile with only 35% of the contracted rentals due for expiry till FY29E. Occupancy at its non-SEZ portfolio stood at 93% and the SEZ area vacancy has also come down substantially in the last 12 months and is currently at 13%.
* DPU grows 17% in 1QFY26: BIRET achieved 13% YoY increase in same-store NOI driven by 5pps improvement in occupancy and rental escalations. In 1QFY26, income from operating lease rentals (OLR) increased to INR 4.6bn (+9% YoY; flat QoQ). Adjusted NOI increased to INR 4.9bn (5% YoY; 2% QoQ), while NOI margin came in at 77.7%. BIRET announced distribution of INR 5.25/unit (+17% YoY; flat QoQ) with 12% share of dividend and 36% was in the form of interest on shareholder debt. As a result, c.64% of the distribution to the unit holders will have no tax incidence. LTV was steady QoQ at 25%, which came down in 4QFY25, post the INR 35bn fund-raise in Dec’24. The board of the REIT manager has approved (subject to unitholder approval) a preferential issue of INR 10bn to a mix of investors including corporate treasuries, family offices and high networth individuals.
* Development and ROFO pipeline: BIRET has a planned capex outlay of c. INR 3bn spread across mixed use development at K1, Crisil House refurbishment (Downtown Powai) and facial upgrades at G1, which will primarily be debt-funded. The REIT is also in conversations with Brookfield Sponsor group to evaluate acquisition opportunities in Bengaluru and Chennai, spanning c.12.1msf of assets.
* Maintain BUY with a TP of INR 330: We expect BIRET to deliver 11%/13% NOI/NDCF CAGR over FY25-FY28E aided by the healthy leasing momentum as the outlook for the commercial office improves further. We maintain a BUY rating with a revised Mar’26 TP of INR 330 (11.5% total return; 4.5% capital appreciation; 7.0% dividend yield).
Key concall highlights
- Gross leasing activity across India remained strong, with 40msf leased in 1HCY25, and it is expected to exceed 90msf for the full year, indicating a healthy demand environment for commercial office assets.
- Within BIRET’s portfolio, GCCs have been major demand driver, contributing 40% of total gross leasing over the last 18 months
- The SEZ portfolio has witnessed strong demand with overall occupancy improving by 11% over the last 18 months
- The REIT successfully completed INR 10bn preferential issue during the quarter to fund future growth opportunities. In order to tap the demand from HNIs and corporate treasuries, Company opted for preference issue over QIB
- BIRET is in active discussions with its sponsor group to acquire ROFO assets in Bengaluru and Chennai. It had also placed a bid for the Equinox asset but was out bided by a third party.
- The portfolio has already realized interest savings of INR 600mn due to rate cuts so far, and the management is evaluating fixed-rate debt options to lock in low rates ahead of upcoming potential acquisitions.
- Upon portfolio stabilization at 97.5% occupancy, BIRET expects Net Operating Income (NOI) to grow by 13% and Distribution per Unit (DPU) to improve by 23%, without factoring in any additional benefit from future rate cuts and rent escalations.
- The REIT has a leasing pipeline of around 5msf, and committed occupancy has already reached 89%, with expectations to increase it further to 93–94% in the near term as discussions materialize.
- BREIT also has 1.7msf of NPA (non-performing asset) area, which is currently under active discussion for leasing, and successful conversion could lead to a ~300 basis point increase in overall portfolio occupancy.
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