The Indian Real Estate Investment Trust (REITs) landscape is marked by the presence of three key players – Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust REIT. Each entity showcases distinctive financial and operational characteristics, providing investors with varied opportunities and risks.
Performance Analysis
Embassy Office Parks REIT stands out with a robust financial performance, marked by a 15% revenue growth in FY23. The Net Operating Income (NOI) increased by 11%, maintaining a healthy NOI margin of 81%. The REIT’s leasing activities are notable, demonstrating a substantial new leasing of 3.2 MSF and renewals of 1.8 MSF. With a vast completed area of 35.3 MSF and a significant development potential of 9.9 MSF, the Embassy maintains a strong market presence. Its occupancy rate of 83% and a Weighted Average Lease Expiry (WALE) of 6.9 years further solidify its position.
Mindspace Business Parks REIT exhibits robust financial growth, boasting a 17% increase in revenue in FY23. The NOI grew by 13%, accompanied by a commendable NOI margin of 83%. The REIT showcases strong leasing activities, with 2.48 MSF of new leasing and a comparable occupancy rate of 83.80%. The completed area of 26.1 MSF and a development potential of 6.2 MSF position Mindspace as a formidable player in the market.
Brookfield India Real Estate Trust REIT maintains a steady financial performance, with a 19% increase in revenue in FY23. The NOI grew by 15%, although with a slightly lower NOI margin of 74%. The REIT adopts a more conservative leasing strategy, securing 0.87 MSF in new leasing and focusing on renewals (1.26 MSF). With a completed area of 20.7 MSF and a development potential of 4.6 MSF, Brookfield balances its market presence with prudence.
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In terms of financial health, Mindspace demonstrates a conservative approach with a lower Net Debt to Gross Asset Value (GAV) ratio (19.80%). Embassy maintains a strong financial position, while Brookfield shows a relatively higher level of leverage (34.30%). Market capitalization and enterprise values align with the respective asset values for all three REITs.
Each REIT has its strengths and considerations. Embassy Office Parks REIT stands out in leasing activity and diversified portfolio, Mindspace REIT has a strong NOI Margin and a substantial completed area, while Brookfield Real Estate Trust showcases growth potential and a competitive portfolio size. Investors should carefully consider the specific attributes and risk factors associated with each REIT before making investment decisions.
Following table shows a detailed comparison of REITs:
| Particulars | Embassy Office Parks REIT | Mindspace Business Parks REIT | Brookfield India Real Estate Trust REIT |
| FY23 (YOY Change) | FY23 (YOY Change) | FY23 (YOY Change) | |
| Revenue From Operations | 3,420 (+15%) | 2,069 (+17%) | 1,197 (+19%) |
| Net Operating Income (NOI) | 2,766 (+11%) | 1,710 (+13%) | 889 (+15%) |
| NOI Margin (%) | 81% (-3%) | 83% (-1%) | 74% (-3%) |
| NDCF at SPV Level | 2,506 (+1%) | 1,800 (+58%) | 778 (-62%) |
| NDCF at REIT Level | 2,061 | 1135 (3%) | 679 (-1%) |
| Distribution | 2,058 | 1133 (4%) | 677(-1%) |
| New Leasing | 3.2 MSF | 2.48 MSF | 0.87 MSF |
| Renewals | 1.8 MSF | 1.61 MSF | 1.26 MSF |
Half-Year Financials Performance Comparision:
| Particulars | H1FY24 (YOY Change) | H1FY24 (YOY Change) | H1FY24 (YOY Change) |
| Revenue From Operations | 1,803 (+7%) | 1,160 (+17%) | 714 (+20%) |
| Net Operating Income (NOI) | 1,457 (+5%) | 946 (+16%) | 592 (+24%) |
| NOI Margin (%) | 81% (-1%) | 82% (-1%) | 83% (+3%) |
| NDCF at SPV Level | 1,295 (+4%) | 669 (-42%) | 426 (+11%) |
| NDCF at REIT Level | 1,035 (+1%) | 572 (+1%) | 357 (-7%) |
| Distribution | 1,034 (+1%) | 569 (+1%) | 357 (+5%) |
| New Leasing | 2.2 MSF | 0.8 MSF | 0.5 MSF |
| Renewals | 0.9 MSF | 0.3 MSF | 0.3 MSF |
Other Parameters:
| Particulars | Embassy Office Parks REIT | Mindspace Business Parks REIT | Brookfield India Real Estate Trust REIT |
| Completed Area (MSF) | 35.3 MSF | 26.1 MSF | 20.7 MSF |
| Development Potential (MSF) | 9.9 MSF | 6.2 MSF | 4.6 MSF |
| Total Area (MSF) | 45.3 MSF | 32.3 MSF | 25.3 MSF |
| Gross Asset Value (Crores) (as of 30th September 2023) | 52,652 Crores | 28,671 Crores | 28,488 Crores |
| Occupancy (%) | 83% | 83.80% | 80% |
| WALE (years) | 6.9 years | 6.9 years | 7.4 years |
| In-Place Rent (PSF/month) | Rs 85 | Rs 67 | Rs 82 |
| Cost of Debt (%) | 7.40% | 7.80% | 8.30% |
| Net Debt | 15,321 Crores | 5,677 Crores | 11,450 Crores |
| Gross Asset Value (Crores) (as of 30th September 2023) | 52,652 Crores | 28,671 Crores | 28,488 Crores |
| Net Debt to GAV | 29% | 19.80% | 34.30% |
| Market Capitalization | 28,490 Crores | 18,608 Crores | 10,718 Crores |
| Enterprise Value | 43,811 Crores | 24,285 Crores | 22,168 Crores |
All data in the above table is as of 30th September 2023.
Note:
NDCF at SPV Level for Brookfield Real Estate Trust was exceptionally high due to debt raised in FY22 for the N2 acquisition.
NDCF at SPV Level for Mindspace REIT has reduced significantly because of an exceptional item in Q1FY23.
For Brookfield Real Estate Trust, FY22 includes 50 days from February 8, 2021, to March 31, 2021, as it was the first FY.
“Apart from the office portfolio mentioned above, Embassy Office Parks REIT also has 4 hotels with 1,096 completed keys and 518 under-construction keys; it also has a solar park with a capacity of 100MW. Only 93% of the abovementioned GAV comes from the office segment.”
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.
