Brookfield India REIT, a real estate investment trust sponsored by Brookfield Asset Management Inc., has filed a draft proposal with the capital markets regulator to raise capital via an initial public offering (IPO) that will also see a partial sale of units by the Canadian investor.
The India REIT, which owns and manages four large campus-format office parks in metropolitan and top-tier cities in India, is looking to raise Rs 3,800 crore ($519 million) by issuing fresh units besides a secondary market sale by Brookfield and its affiliates.
The total REIT offer size is pegged at Rs 4,400-4,500 crore ($602-615 million), two people in the know told VCCircle.
This will be the third REIT offering after the listing of Embassy Office Parks REIT, a joint venture between Bengaluru-based Embassy Group and private equity giant Blackstone, in March 2019, and the Mindspace REIT backed by K Raheja and Blackstone proposed earlier this year.
Brookfield, with assets worth $550 billion under management, aims to be the leading owner of high-quality income-producing commercial real estate assets in India’s key gateway markets which have entry barriers, Brookfield stated in its draft proposal.
It expects approximately 90 million people to join India’s workforce by 2030, which will structurally drive further increase of office absorption and create compelling opportunities across the commercial real estate market in India.
Its strategy is to address this demand by owning and operating large “fully-integrated”, “campus-format” office parks in established locations, and providing a complete ecosystem to its tenants and employees.
“The COVID-19 pandemic has accelerated the structural shift that was already underway prior to the crisis in relation to the usage and deployment of technology, especially cloud, data analytics, e-commerce and digital transformation,” the draft document stated.
“The global spending on software and IT services is expected to grow at a robust rate between 2019-20 and 2024-25 and the technology industry in India is expected to grow at a compound annual rate of 13% to $350 billion by 2024-25 from an estimated $191 billion in 2019-20,” the document added.
Brookfield has an initial portfolio of 14 million square feet (msf) with the call option to acquire another 8.3 msf and rights of first offer on an additional 6.7 msf, both currently owned by members of the Brookfield Group.
Mindspace REIT owns a portfolio of properties in India’s four key office markets. Its portfolio has a total leasable area of over 29.5 msf. This is one of the largest Grade-A office portfolios in India. Of the total, 19.8 million sq ft is completed area, 6.1 million sq ft is under-construction and 3.6 million sq ft is for future development.
Embassy Office Parks is Asia’s largest REIT in terms of portfolio size of over 33 msf.
Here’s a snapshot of the Brookfield India REIT offering:
Use of proceeds
Brookfield’s India REIT aims to repay or make advance payment of its existing borrowings of asset special purpose vehicles (SPVs).
The asset SPVs had a total debt of Rs 5,628.94 crore as of July 2020.
Brookfield looks to invest in its asset SPVs by lending to these asset SPVs or subscribing to equity or debt instruments of these SPVs to retire some of the debt.
Bankers
The REIT has hired 10 bankers. Morgan Stanley India, BofA Securities, Citigroup Global Markets, HSBC Securities and Capital Markets (India), Ambit Capital, Axis Capital, IIFL Securities, JM Financial, DSP Merrill Lynch, and Kotak Mahindra Capital are the merchant bankers managing the IPO.
Lawyers
Shardul Amarchand Mangaldas & Co is the India legal counsel to Brookfield and affiliates, while Sidney Austin LLP is the international counsel to the REIT offering.
Cyril Amarchand Mangaldas and Clifford Chance are India and international legal counsel representing the merchant bankers.
Company
Of the initial portfolio of 14 msf, the REIT has 9.8 msf of completed area, while 0.6 msf is under-construction and 3.6 msf is future development potential.
Some of its tenants from the initial portfolio include multinational companies (MNCs) such Barclays, Bank of America Continuum, RBS, Accenture, Tata Consultancy Services and Cognizant.
Financials
The India REIT clocked a consolidated net profit of Rs 15.12 crore for 2019-20 on revenue from operations of Rs 9,56.70 crore.
It reported a loss of 15.74 crore in 2018-19 on revenue of Rs 895.91 crore.
For 2017-18, the REIT reported consolidated net profit of Rs 161.08 crore on revenue of Rs 821.84 crore.