Brookfield Asset Management likely to file for REIT early this week

Canada-based Brookfield Asset Management is looking to file a draft red herring prospectus (DRHP) for the initial public issue of its real estate investment trust (REIT) early this week, said sources in the know, adding that the fund manager could raise around $500 million (Rs 3,685 crore) through REIT.
 

“The filing could happen on Monday or Tuesday since they have finished all the paperwork so far,” said sources, adding, “The fund manager is looking at listing by the end of the year, after Securities and Exchange Board of India’s approval.”
 

Citigroup, Morgan Stanley, Bank of America, and HSBC are the main bankers for the REIT issue. Brookfield declined to comment on the subject.
 

This will be the third such REIT issue after Embassy Office Parks and Mindspace Business Parks. Both these REITS were co-sponsored by global private equity fund manager Blackstone.
 

Embassy Office Parks raised Rs 4,750 crore through the public issue of its REIT last year, while the initial public offering of Raheja-Blackstone’s Mindspace Business Parks REIT raised Rs 4,500 crore.
 

Sources said that Brookfield will allow investors to take part in the growth of commercial properties in North India. Embassy REIT’s properties are mostly in the South. Mindspace’s properties are in Mumbai.

 

Brookfield owns 22 million square (sq.) feet (ft) of commercial property in the country. This includes commercial properties it bought from the Hiranandani family in Powai, the assets of Unitech Corporate Parks in Gurugram and Kolkata, and commercial properties in Kurla, etc.
 

Though Brookfield is looking to include some of Bengaluru-based developer RMZ Corp’s assets in the REIT, the deal is yet to be finalised, said sources.
 

The deal will also include Brookfield buying RMZ-promoted co-working firm CoWrks, as it is interested in co-living spaces.
 

Both companies have applied to the Competition Commission of India for clearance.  Brookfield is acquiring around 15 million sq. ft of assets from RMZ at Rs 14,000 crore. The assets are in Chennai, Bengaluru, and Gurugram.
 

“Not only does Brookfield have a high quality portfolio leased to global multinational corporations, they are a very flexible landlord with very high client-retention rates,” said Ramesh Nair, country head and chief executive officer of JLL, the global real estate consultant.
 

Nair said that given the fact that both the Embassy Office Parks and Mindspace REITs have done well, and REIT as a product offers predictability, liquidity, low volatility, rental growth, and periodic dividends, it is expected to do well.
 

Brookfield earlier acquired the assets of Hotel Leelaventure for Rs 3,950 crore last year.
 

The company was also in talks with Mumbai International Airport to lease 15 acres of land in Mumbai. The fund manager plans to scale up this venture. In June, Brookfield bought two floors from Jet Airways in Mumbai’s Bandra Kurla Complex for Rs 490 crore.
 

The government recently approved Brookfield’s Rs 25,215-crore investment into the Tower Infrastructure Trust, an infrastructure investment trust of telco Reliance Jio’s tower assets.
 

Real estate developers may raise more than $25 billion over the next three years by listing their rent-yielding commercial properties through the REIT route, property consultant Anarock estimated earlier this year.
 

Blackstone's two joint ventures (JVs) — with Bengaluru-based Salarpuria Sattva and Pune-based Panchshil Realty — have started work on the REITs, according to sources.
 

The Salarpuria-Blackstone JV has a portfolio of 16 million sq. ft of commercial assets, mostly in Hyderabad. Last year, both bought Café Coffee Day Group’s tech park in Bengaluru at an enterprise value of Rs 2,700 crore.
 

Blackstone is also in talks with Bengaluru-based Prestige to buy some 20 million sq. ft of commercial assets worth Rs 12,745 crore.
 

Blackstone could put the entire chunk of Prestige assets into a REIT and list it in a year or two. “Since most of Prestige’s assets are in Bengaluru and doing good business, it will be easier for Blackstone to get investors,” said people in the know.
 

Blackstone could also go for a REIT for mall properties, people in the know added. Its mall management company Nexus Malls owns nine malls with a total area of 6 million sq. ft.