Global investment firm Brookfield's Real Estate Investment Trust (REIT) public issue will hit the capital market on Wednesday to raise up to Rs 3,800 crore. Brookfield REIT will be the third listed trust in India if it is successfully subscribed.
The first one Embassy Office Parks REIT, backed by Blackstone and Embassy group, got listed in April 2019 after raising Rs 4,750 crore. Mindspace Business Parks REIT, owned by K Raheja and Blackstone, was listed in August last year amid COVID-19 pandemic after raising Rs 4,500 crore.
The initial public offer (IPO) of Brookfield India Real Estate Trust (Brookfield REIT) will open on February 3 at a price band of Rs 274 to Rs 275. The public issue will close on February 5. Brookfield REIT, the country's only 100 per cent institutionally managed public commercial real estate vehicle, is issuing units aggregating up to Rs 3,800 crore. It is offering 14 million square feet of its commercial portfolio in the REIT.
The net proceeds from the public issue will be utilised for partial or full pre-payment or scheduled repayment of the existing debt of Asset SPVs (special purpose vehicles). Bids can be made for a minimum lot of 200 units and in multiples of 200 units thereafter by bidders other than the units subscribed for by anchor investors. The units are proposed to be listed on BSE and NSE.
REIT, a popular instrument globally, was introduced in India a few years ago, aimed at attracting investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enable retail participation. Industry experts and property consultants expect the Brookfield issue to be successful, with active participation from retail investors.
"The Brookfield REIT IPO which opens for subscription tomorrow comes at a time when the market is buoyed by the Union Budget, with REITs enabled to raise Debt from Foreign Portfolio Investors (FPIs). "Dividend distribution of REITs has also been made exempt from TDS for domestic shareholders, while for FPIs the TDS will be at a lower treaty rate," Vestian CEO-APAC Shrinivas Rao told PTI.
With the backing of one of the largest asset management companies globally, Rao said retail investors would favour investing in the IPO with a view on both steady dividend income and long-term capital appreciation. Ramesh Nair, the former CEO of JLL India, said: "The Brookfield REIT is definitely a must-buy for retail and institutional investors given the stable yield, rental growth potential, identified acquisition opportunities where there is an exclusive right, mark to market rental correction possibility, land with new development potential and gradual asset value appreciation".
This REIT offers retail and institutional investors an opportunity to invest in a fully integrated office ecosystem with the predictability of income with low volatility and high liquidity, Nair said. Shobhit Agarwal, MD & CEO of Anarock Capital, said: "The Brookfield REIT IPO launch definitely helps strengthen the overall India real estate investment trust space".
With the initial two REITs from Embassy Group and K Raheja Corp garnering very good support from investors, he said more and more new investors are coming into the listed real estate assets space via REIT. The success of the first two REITs, along with the expected success of the Brookfield REIT, will definitely encourage many more real estate asset owners to come out with REIT listings in the future, Agarwal said.
Sumit Suri, Senior Director (Capital Markets), JLL India, said: "REITs have been very well received by the investors in India so far. Both Embassy and Mindspace REITs were oversubscribed. Their success has opened the door for many such future offerings. Budget 2021 has given a major boost to market confidence". The Finance Minister on Monday announced some positive push for REITs which will help further enhance investor confidence, he said.
"With Tier 1 sponsor and quality tenants, we may see good retail participation for the current REIT offer as well," Suri said. Tushar Rane, Executive Director - Capital Markets (Core Assets), Knight Frank India, said the Brookfield REITs offering 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 rides high on the long-term investor confidence," he said. Piyush Gupta, MD, Capital Markets & Investment Services (India) at Colliers International, said: "With two REITs in India having demonstrated strong performance with both capital appreciation and consistent dividend pay-outs, the retail investors are likely to find Brookfield opportunity attractive for exposure to Office Real Estate as an alternate investment asset class".
Further, he said, the sentiment is strengthened by certain large office transactions in the past few months reflecting the confidence of large global institutional investors. Midas FinServe Pvt Ltd MD Rajesh Bansal, however, cautioned that there may be significant financial stress in the Indian real estate ecosystem right after the RBI moratorium period ends.
The fears of disruption in office space due to COVID-19 and the emphasis on work from home may adversely impact the rental pricing, he said.