Brookfield REIT: All you need to know about the third REIT

Even though the third REIT to be listed in India, Brookfield REIT, closed at a price just 2.4% higher than the issue price, investment in REITs is here to stay.

One of the world’s largest alternative asset managers from Canada – Brookfield Asset Management recently introduced Brookfield Real Estate Investment Trust, which is India’s only institutionally managed public commercial real estate. After Embassy Office Park Real Estate Investment Trust (REIT) in the year 2019 and Mindspace in the year 2020, Brookfield is the third REIT to be listed on the bourses. With the launch of the third REIT, the market capitalization of REITs now stands at $8 Billion.

IPO of Brookfield India Real Estate Trust opened at ₹274 to ₹275 per unit on 3rd February  and was subscribed five times in institutional investors’ category and 12 times in retail investors’ segment till the final day – 5th February. It was listed at ₹281.70 per unit on 5th February, which is 2.4% higher than the issue price.

What are REITs?                                                                      

An organization that owns, finances, operates an income generating real estate is called Real Estate Investment Trust. These companies manage the high-value real estate properties and mortgages. They put them on lease and collect rent, which is later distributed as dividends amongst their shareholders. This is a good option to generate capital for investors.                

REIT Portfolio of Brookfield India

  • Brookfield India is an owner of large campus office parks in Gurugram, Noida, Mumbai and Kolkata spanning around 14 Million Square Feet.
  • Brookfield owns 42 million square feet office properties and a portfolio worth $17 Billion across infrastructure, real estate, private equity, and renewable power in India.
  • Besides, it also owns seven toll roads, roadway, wind and solar assets, construction business and real estate management services.
  • The company counts multinational companies like Bank of America, Barclays, Accenture, Tata Consultancy Services, RBS, and Cognizant as its clients.
  • Brookfield India REIT Properties has witnessed more than 94% occupancy for last the four financial years.

Peer Comparison

Valued at 88.4% of net asset value, Brookfield REIT’s Unit IPO was priced at ₹275 per share (88.4% of net asset value) whereas Mindspace Business Park and Embassy Office Parks REIT are trading at around 98.9% to 93.6% of their net asset value, respectively. Therefore, it seems to be reasonably priced  like the earlier REITs.

Name of the REIT Embassy Office Parks REIT Mindspace Brookfield India REIT
Issue Period 18th-20th March, 2019 27th-29th Jul 2020 3rd – 5th Feb 2021
Issue Size ₹ 4,570 Crore ₹ 4,500 Crore ₹3,800 Crore
IPO Price ₹ 299-300/Share ₹274 – 275/Share ₹274 – 275/Share
Min Application Size 200 Units 200 Units 200 Units
Total completed Area 26.2 Mn Sq.Ft. 23 Mn Sq.Ft. 10.3 Mn Sq.Ft.
Area under development 2.6 Mn Sq.Ft. 2.8 Mn Sq.Ft. 0.1 Mn Sq.Ft under construction; 3.7 Mn Sq.Ft. of future development
Dividend distributed in FY2020 ₹24.39 per unit No dividend announced yet No dividend announced yet
Avg Rent/Sq.Ft. ₹68 ₹52.5 ₹62
Occupancy Rate 92.20% 92.40% 92%
Geographical Presence Bangalore, NCR, Mumbai, Pune Pune, Mumbai, Chennai, Hyderabad Mumbai, Noida, Gurugram, and Kolkata
Minimum Investment at Current market prices (15th Feb 2021 ₹69,900 (200 units @₹349/unit ₹63,600 (200 units @₹318/unit) ₹55,000 (200 units @₹275/unit)

Market experts believe that investment in Brookfield REIT IPO launch would give the needed impetus to the real estate investment trust space. Although, there were apprehensions over the demand in commercial real estate space looking at the increasing adaption of work from home culture. However, on the contrary, Brookfield India REIT garnered a profit of ₹15.12 Crore in 2020 after the loss of ₹15.75 Crore in 2019. The high investor participation in Brookfield REIT hints at the product’s acceptance in the market.

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