Broker's call: Brookfield REIT (Buy)

| Updated on April 22, 2021

ICICI Securities

Brookfield REIT (Buy)

Target: ₹296

CMP: ₹241

We initiate coverage on Brookfield India REIT (BREIT) with a BUY rating based on March 2022 DCF based target price of ₹296/unit. BREIT is sponsored by the Brookfield Group and has 91 per cent committed same -store occupancy and in-place rent of just ₹65/psf/month.

We like the company given the 9 per cent estimated NOI CAGR over FY21-23 and with just 0.1 msf of under-construction assets, the REIT offers a defensive yield play along with organic growth in its operational assets.

The REIT’slow initial leverage of 0.3x net debt/equity leaves headroom for injection of new assets in the REIT portfolio. While Covid-19 will likely impact FY22E leasing activity, our view is that the Indian office market retains many positives such as: limited number of 8-10 pan-India developers capable of building quality rental assets; India remains one of the more affordable office markets in the world, with average rentals for Grade A office markets in peripheral/suburban markets hovering around one USD/psf/month or ₹70-75/psf/month; and India leads in STEM (Science, Technology, Engineering, Mathematics) talent for technology assignments with over 2 million students graduating every year

Key risks to our thesis are the large-scale adoption of work-from-home by occupiers over the long term and rising interest rates globally.

Published on April 23, 2021

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