Brookfield India REIT: Brookfield India REIT well-poised to benefit from market recovery: JM Financial

MUMBAI: Brookfield India Real Estate Trust, India’s only institutionally managed public commercial real estate vehicle, is well poised to benefit from recovery in real estate market as well as significant increase in offshoring trends for the large IT companies which form majority chunk of the REIT tenant base, according to a note by domestic brokerage JM Financial Institutional Securities.

While initiating coverage with a 12 months target price of Rs 280 as against the current market price of Rs 232,

said that Brookfield India REIT offers a compelling value proposition with a global parentage of Brookfield Group and a stable portfolio of 75% of the rentals from MNCs with committed same store occupancy of 91% as of February 2021.

Brookfield India REIT offers one of the largest office portfolios across key gateway markets comprising an initial portfolio 14 msf leasable area spread across 4 properties. Going forward only 0.1 msf is under construction and net operating income (NOI) is expected to grow by 10% CAGR over FY21-23 to Rs 800 crores led by contractual rent escalations and lease up of completed area, according to the brokerage.

Amidst the global pandemic, uncertainties regarding work from home have impacted the commercial real estate market. However, JM Financial expects this to be a near-term phenomenon post which the demand for Grade-A commercial office spaces is expected to pick-up led by increased outsourcing and offshoring trends by MNCs.

The trust launched its maiden initial public offer (IPO) with a size of Rs 3,800 crore early this year. The IPO, which was priced at Rs 275 per unit, listed with a premium of 2.43% at Rs 281.70 on 16 February. Since then the REITs declined 24% to a low of Rs 215.25 on 25 March.

Last week in a research note, Morgan Staley said that Brookfield India REIT is an attractive yield play.

“Brookfield India REIT has defensive and growing cash flows supported by underlying appreciating real estate assets. Income payout of 90% plus implies a high distribution yield. Our price target of Rs 279 implies 24% upside from the current market price, plus FY22 dividend per unit implies an attractive 9.3% dividend yield – potential total return of 34% over the next 12 months.” Morgan Stanley said in a note.