After Embassy and Mindspace, Canadian asset manager Brookfield has become the third player to launch its REIT in India
The initial public offer (IPO) of Brookfield’s Indian REIT, Brookfield India Real Estate Trust, successfully closed on February 5, 2021, witnessing an oversubscription of eight times. The Canadian alternative asset manager’s Rs 3,800-crore offer received bids for 60.59 crore units against the IPO size of 7.62 crore units, indicating how favorably investors viewed India’s commercial real estate market.
After Embassy and Mindspace, Canadian asset manager Brookfield has become the third player to launch its real estate investment trust (REIT) in India. While the Embassy Office Parks REIT went public in 2019 the Mindspace Business Parks REIT was listed in August 2020.
For the uninitiated, REITs are mutual fund-like instruments, through which investors can own income-generating properties that they otherwise cannot afford to invest in. It is a good product for investors looking for long-term exposure in the commercial segment since REITs are allowed to invest only in commercial real estate and office spaces currently. They also have to distribute 90% of the rental income as dividends.
According to Anurag Mathur, CEO, Savills India, the Brookfield IPO is well-timed, especially after the robust performance of the two previous REITs and the recent Union Budget 2021, which laid out measures to boost this financial instrument. “We saw the Mindspace REIT, which was launched during the peak of the lockdown, oversubscribed multiple times. We envision that Brookfield’s IPO will also attract strong demand. Two primary factors that will continue to drive REITs’ performance are the strong confidence in the Indian commercial real estate sector by investors and the growth prospects of occupiers,” Mathur said.
In Budget 2021, REITs and InvITs were allowed to raise debt capital at competitive rates. The Budget also proposed that the dividend payment to REITs and InvITs would be exempt from tax deducted at source (TDS). Debt financing of InvITs and REITs by foreign portfolio investors would be enabled, by making suitable amendments in the relevant laws.
Commenting on the IPO, Anshuman Magazine, chairman and CEO, India, South-East Asia, Middle-East and Africa, CBRE, said that REITs continued to be viewed as favored investment avenues, given the comparatively resilient underlying cash flows. “Earlier, REITs in India witnessed good support from investors, after which the industry saw an increase in the number of new investors in the listed real estate assets space. While the office landscape is being redefined in the post-COVID-19 scenario, the segment is expected to emerge stronger and REITs would continue to offer a relatively stable income-generating opportunity and be perceived favorably by investors. With more REITs expected in the future, we can expect an increase in the influx of global institutional capital and increasing retail penetration of investing in stable income-generating assets,” Magazine said.
According to Tushar Rane, executive director – capital markets (core assets), Knight Frank India, the Brookfield REIT is a great indicator of the strong future that commercial real estate has in India. “After the successful listing of Embassy and Mindspace REITs, this launch shows the long-term investor confidence in India’s office market. We expect this momentum to regain in the near future, which would encourage more participants to enter the REIT market,” he said.
Piyush Gupta, MD, capital markets and investment services (India), Colliers International, added: “The announcement of the Brookfield IPO further strengthens India’s story of attracting global institutional capital and retail penetration of investing in stable income-generating assets. This is also allaying fears of disruption in office space due to the COVID-19 pandemic.”
Key facts about Brookfield India Real Estate Trust (Brookfield REIT)
- It is India’s only 100% institutionally-managed public commercial real estate vehicle. It allotted 6,21,80,800 units to 39 anchor investors and raised Rs 1,709.97 crores ahead of the company’s IPO at the upper price band of Rs 275 per unit.
- Brookfield REIT’s initial portfolio is made up of four large campus-format office parks in Mumbai, NCR, and Kolkata, totaling 14 million sq ft.
- The company owns nearly USD 17-billion in its portfolio across real estate, infrastructure, renewable power, and private equity in India. It owns and operates 42 million sq ft of real estate space.
- Axis Trustee Services is the trustee while BSREP India Office Holdings V is the sponsor. Brookprop Management Services is the manager of the IPO.
- The proceeds from the public issue will be used for the payment of existing debt.
RMZ sells real estate assets to Brookfield for $2 billion
Brookfield Asset Management has agreed to buy Bangalore-based RMZ Corp’s commercial properties for $2 billion, in what is being touted as one of the biggest real estate deals in India
October 20, 2020: At a time when real estate markets across the world are reeling under the economic depression caused by the Coronavirus pandemic, Canadian giant Brookfield Asset Management has agreed to buy Bangalore-based RMZ Corp’s commercial properties for $2 billion, touted to be among the biggest real estate deals in India. Last month, the Competition Commission of India had approved the deal.
In a statement issued on October 19, 2020, the Bangalore-based real estate developer said the Canadian firm would buy 12.5 million sq ft of office and co-working spaces in Bengaluru and Chennai, across RMZ Infotech, RMZ Galleria (India), RMZ North Star Projects, RMZ Ecoworld Infrastructure and RMZ Azure projects. This accounts for 18% of RMZ’s entire commercial portfolio.
The $2-billion deal will fuel RMZ’s hyper-growth strategy of aiming to grow their real asset portfolio over the next six years. The deal also includes divestment of the group’s co-working business, CoWrks, the company said in the statement.
Chairman Manoj Menda-led RMZ Corp has a total real estate portfolio of 67 million sq ft and plans to increase it to 85 million sq ft by 2025. The builder operates its co-working spaces under the brand name CoWrks. The developer, whose commercial asset portfolio is valued at nearly $10 billion, has its presence in six mega markets of India, including Bangalore, Chennai, Hyderabad, NCR, Mumbai, and Pune.
While stating that it marks the largest-ever deal in the Indian real estate industry, RMZ said it would use the capital to pay off its existing liabilities, after which it would become a debt-free entity, and expand its portfolio. The builder’s debt is estimated at Rs 12,500 crores.
“Upon divestment, RMZ is now among the only zero-debt real estate companies, globally. With this deal, we have ample headroom to achieve our next phase of growth that RMZ 2.0 has defined for us. Our massive transformative purpose is to disrupt the way people view work, defining the future of space,” Menda said.
While the 18-year-old company has the largest presence in the Bangalore market, where it has a total of nine projects, including Ecoworld, Ecoworld Series 20, Ecoworld Series 30, Ecospace, The Millenia, Infinity, Nxt, Azure, and Centennial, Hyderabad is its second-biggest market, where it has projects including The Sky View, Nxity, The Vault, and Spire. The builder has one project each in the NCR (Infinity) and Mumbai (Nexus) markets.
“This real estate transaction is momentous for the commercial real estate industry, in light of its large scale at the right juncture. Also, it further accentuates the strength and resilience of the commercial office business,” added Arshdeep Singh Sethi, MD, RMZ Corp.
Last month, the Canadian asset manager, which owns and operates 22 million sq ft of commercial spaces in India, filed for a $600-million initial public offering (IPO) for its real estate investment trust (REIT). With that, it will become the third company in India to list a REIT, after Embassy Office Parks and Mindspace.
Brookfield to raise Rs 4,500 crores by listing India’s third REIT
Fully sponsored by Brookfield, the USD 600-million REIT is expected to be listed between December 2020 and January 2021
September 30, 2020: A day after market watchdog SEBI (Securities and Exchange Board of India) provided relaxations to REITs (real estate investment trusts) and InvITs (infrastructure investment trusts) for preferential and institutional placement of their respective units, global asset management major Brookfield, has unveiled plans to file for a USD 600-million initial public offering (IPO) for its REIT.
Once the Canadian investment giant files the draft red herring prospectus for the IPO and receives the necessary approvals for the same, it will become the third company in India to list a REIT. Embassy Office Parks and Mindspace are the two already listed REITs in the country. While the Embassy Office Parks REIT is backed by global private equity major Blackstone, the Mindspace REIT is also backed by Blackstone along with real estate major K Raheja Corp. Unlike the other two offerings, the REIT by Brookfield is fully-sponsored by the Canadian investment major. The REIT is expected to be listed between December 2020 and January 2021.
With total assets that include premium office space of 14 million sq ft, the REIT has real estate destinations such as Mumbai, Gurgaon, Noida, and Kolkata covered under its fold. Bank of America, CitiBank, Morgan Stanley, and HSBC are among the 11 merchant bankers that would act as the global coordinators for the IPO issue.
REITs are entities that own and operate commercial real estate, by pooling in money from various stakeholders. Operating in the same manner as mutual funds, REITs are traded on stock exchanges. Under a wide-ranging portfolio, REITs own and operate all sorts of commercial real estate, including office spaces, warehouses, malls, hostels, hospitals, etc. These long-term investments are expected to earn much higher yield, as compared to traditional real estate. Long-term investors gain between 7% and 9% returns on their investments.
On September 29, 2020, the SEBI said REITs could raise equity capital through the institutional placement route two weeks after a previous such exercise. Earlier, a gap of six months between two institutional placements was required, under the SEBI’s norms. The market regulator has also allowed REITs and InvITs to list on stock exchanges operating in the International Financial Services Centre.