Brookfield India REIT IPO opens for subscription tomorrow; here’s all you need to know

Brookfield India Real Estate Investment Trust’s (REIT) initial public offering (IPO) will open for subscription tomorrow. Brookfield REIT will be third real estate investment trust to be listed on the bourses in India after the IPO, but the only 100% institutionally managed public commercial real estate vehicle. The issue opens for subscription tomorrow and will close on Friday. So far, domestic markets have seen Embassy Office Parks REIT in 2019 and Mindspace Business Parks REIT in 2020, both trading at a premium over their issue price. 

About the issue

Investors can bid for Brookfield India REIT at an issue price of Rs 274 to Rs 275 per unit, translating to Rs 3,800 crore issue size. Bids for the REIT can be placed for 200 units or multiples thereafter, with 13.81 crore units on offer. This takes the minimum investment allowed in the Brookfield REIT IPO to Rs 55,000 at the upper end of the price band. Currently, BPG Holdings Grou, an entity of Brookfield, holds a 99% stake in the REIT. Through the public issue, the real estate trust aims to repay its existing debt. 

REIT portfolio

Brookfield India REIT owns an Initial Portfolio of 4 large campus-format office parks, located in Mumbai, Gurugram, Noida and Kolkata. 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. “Despite the strong operating margin, Brookfield India RIET’s financials have not been encouraging. Its net profit stood merely at Rs 15 crore in FY20, while the company incurred Rs 74 crore net loss in 1HFY21,” analysts at Reliance Securities said in a note. 

Properties of Brookfield India REIT have 96% occupancy, higher than peers and 6.8 years of weighted average lease expiry, which is almost equal to peers. Brookfield India counts multi-national corporations such as Barclays, Bank of America Continuum, RBS, Accenture, Tata Consultancy Services and Cognizant as its clients. 

Dividend play?

REITs act an attractive dividend play as not less than 90% of the Net Distributable Cash Flows (“NDCF”) of its Asset SPVs are required to be distributed to Brookfield REIT. “At least 90% of the NDCFs of Brookfield REIT (“REIT Distributions”) shall be declared and paid once every quarter of a Financial Year by their Manager. The first distribution shall be made upon completion of the first full quarter after the listing of its Units on the Stock Exchanges,” Axis Securities said. Further, the income distributed by Brookfield REIT shall not be included in the total income of the unit-holders. 

Should you subscribe or not

Analysts at Reliance Securities have a ‘Subscribe with long term perspective’ view on the IPO. “the company expects NDCF to the tune of Rs 660 crore and Rs 700 crore in FY22E and FY23E, respectively which offer yield of ~8%. Hence, we recommend SUBSCRIBE from long-term perspective,” they added.