Brookfield REIT has 15 mn sq ft of call option, ROFO properties: DRHP

The REIT has a initial portfolio of 14 mn sq ft in Gurugram, Mumbai, Noida, Kolkata, mostly bought from Unitech Corporate Parks

Brookfield India Real Estate Trust, a real estate trust sponsored by an affiliate of Canada's Brookfield Canada's  Asset Management, has 15 million sq ft of call option and right of first offer (ROFO) properties, its Draft Red Herring Prospectus (DRHP) showed. This is equivalent to its initial portfolio of assets.

The REIT has two call option properties of 8.3 million sq ft. One is Candor Techspace G1, Gurugram and Candor Techspace, Noida. Both were acquired from Unitech Corporate Parks in 2014. Call option properties means they will be bought at a future date at a certain price.

The REIT has 6.7 million sq ft  ROFO properties, including prime office and retail properties, bought from Hiranandani family in Powai, Equinox Business Park bought from Essar group, Units in Godrej BKC bought in an auction and the Waterstone property in Mumbai.

 

ROFO means the sponsor-owned assets have to be offered to REIT first and if Reit shareholders do not approve, they will be sold to third party.

Besides this, the REIT has a initial portfolio of 14 million sq ft in Gurugram, Mumbai, Noida, Kolkata, mostly bought from Unitech Corporate Parks.

The initial portfolio of 14.million sq ft comprises 9.8 mn sq ft of completed area, 0.6 mn sqft of under construction area and 3.6 mn sq ft with future development potential, the DRHP said.

“Our initial portfolio, combined with the call option properties, forms our “pro forma portfolio”, aggregating to 22.3 million sq ft. The call option properties provide visibility of near-term external growth potential for us and will further help us improve our market leadership in Gurugram and Noida. The call option properties have the potential to contribute Rs 637.2 crore in net operating income (NOI) in FY 2023, and can further increase the NOI for FY2023 by 78 per cent from Rs 814.2 crore to Rs 1451.4 crore," the DRHP said.

The DRHP added that the REIT would also benefit from rights of first offer on the ROFO properties - the Brookfield Group’s 100 per cent-owned commercial real estate assets in India’s financial capital, Mumbai, comprising 6.7 mn sq ft in office space. The pro forma portfolio and ROFO properties combined, creates the potential for it to almost double our initial portfolio’s leasable area to 28.9 mn sq ft, while growing consistent with its strategy of owning high quality real estate in premier locations. 

The REIT filed the DRHP earlier this week to raise Rs 4,400 crore.

Brookfield, however, has not included the assets it bought from RMZ of Bengaluru. It bought 13 mn sq ft from RMZ for Rs 14,000 crore.

When contacted, a Brookfield spokesperson refused to comment on the development.

 

This will be the third REIT offer after Embassy and Mindspace REITs.

The initial public offer consists of units of the REIT consisting of a fresh issuance aggregating up to Rs 3,800 crore and an additional component for an offer for sale.

"The gross proceeds of the fresh issue will be utilised towards partial or full pre-payment or scheduled repayment of the existing indebtedness of asset SPVs, and for general purposes to the extent allowed by regulations," it said.

As of July 31, 2020, its total outstanding debt was Rs 5628.9 crore (excluding CCDs issued to Brookfield), it said.

Morgan Stanley India, DSP Merrill Lynch, Citigroup and HSBC Securities and Capital Markets (India) are the main bankers to the issue.