So far, on the second day of bidding on Thursday, Brookfield India Real Estate Trust's initial public offer (IPO) was subscribed by 20.89 percent, driven largely by corporate and individual investors.Applications for 1,62,42,600 units were received by 11:45 am. 44 percent of the quota allocated for retail and corporate investors was subscribed, and 0.03 percent for institutional investors. As they usually bid for every IPO on the last day, the low turnout of institutional investors is in line with normal patterns. The REIT problem for Brookfields, which is the third REIT ever to be introduced in India, is scheduled to close on Friday.
Details of Brookfield REIT IPO:-
|IPO Date||February 03, 2021, to February 05, 2021.|
|Issue Type||Book Built Issue IPO.|
|Issue Size||Equity Shares of Rs.10 totaling up to Rs.3,800 Crore.|
|Fresh Issue||Equity Shares of Rs.10 totaling up to Rs.3,800 Crore|
|IPO Price||Rs.274 to Rs.275 per equity share|
|Market Lot||200 shares|
75% of Gross Contracted Rentals contracted with multi-national corporations such as Barclays, Bank of America Continuum, RBS, Accenture, Tata Consultancy Services, and Cognizant. This provides comfort in the client's position and stability in future cash flows.
The Brookfield 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 approximately US$575 billion in assets under management, as of September 30, 2020.
The REIT was not as impacted by the COVID lockdown due to the quality of the client profile. The rent collections were always higher than 98%.
The indicative yield as per FY22 NCDF (Net Distributable Cash Flows) is 8.22% on a pre-tax basis. The interest income will be taxed as per the applicable tax rates, and dividend income is exempt from tax.
Reasonable Valuations -
Embassy Office Parks REIT and Mindspace Business Park REIT are trading at a 5.3% and 3% discount to their NAV respectively. At the higher end of the unit price of INR 275, it is available at a steep discount of 16% to its NAV/ unit as of 30th September 2020 which stands at INR 311 NAV/ unit.
Brookfield India REIT subscribed 0.75 times. The public issue is subscribed 0.53 times in QIB, and 0.91 times in the NII category by Feb 4, 2021, 04:59.
Brookfield India REIT is a public issue of 76,278,200 equity shares. The issue offers 41,605,400 shares to qualified institutional buyers, 34,672,800 shares to non-institutional investors.
The Brookfield 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 approximately US$575 billion in assets under management, as of September 30, 2020. Initial Portfolio comprises 14.0 MSF (10.3 msf completed area, 0.1 MSF of under-construction area, and 3.7msf of future development potential. It has 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.
Brookfield’s extensive network of relationships, its deep capital markets experience, operating expertise, a demonstrated track record of managing capital, and its commitment to the resource will be beneficial for unitholders.
Internal and External growth opportunity:
Brookfield real estate assets have two sources of growth –
Identified Assets and ROFO Properties combined, creates the potential for us to almost double the Initial Portfolio’s Leasable Area to 28.9 MSF.
Difficult to Replicate, Dominant, and Strategically Located Properties:
Size and scale in key markets of India provide Brookfield with extensive market information and enhances the ability to respond to market opportunities. On a cost-competitive basis, it is very difficult to replace these office parks as all the four office parks are among the largest in their micro-market and are distinguished by their scale and infrastructure.
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Source:-Economic times. GEPL research team.