Brookfield to scale up real estate investments in India

Canada’s Brookfield Asset Management Inc. is gearing up to significantly increase its real estate investments in India, on the back of a well-performing office market, a residential sector that promises to turn around soon and huge demand for capital from developers, two people familiar with the company’s plans said. (Livemint.com)

As part of the plans, Brookfield will invest in residential projects in top cities from its new $9 billion global real estate fund. These will be transactions in the range of US$90-100 Million through the equity or preferred equity route. It is already exploring deal opportunities and is in active talks with developers.

“Brookfield will look at investments in the residential sector through both equity and debt structures. Developers have taken on a lot of debt for residential projects, and with the sector expected to turn around some time soon, Brookfield is looking to partner with developers on a long-term basis and recapitalize their projects,” said one of the two persons on condition of anonymity.

Brookfield Asset Management has about $240 billion in assets under management globally. It has built a $2 billion asset base in India over the past six years or so, across real estate and infrastructure projects. This will significantly rise through its new investment initiatives. In India, Brookfield is exploring the development of a new line of real estate debt financing that may include setting up a non-banking financial company, the second person cited above said, also on condition of anonymity.

“The NBFC plan is at an early stage, but there are discussions going on to put together a business plan, and set up a permanent vehicle for residential financing,” he said. On the residential front, Brookfield has been lending to projects from Peninsula Brookfield India Real Estate Fund through a partnership with Mumbai-based real estate firm Peninsula Land Ltd. Approx US$ 175 Million fund has almost been deployed, with the investment period getting over. Market conditions will determine if the partners go for a second series of the fund.

Brookfield is a relatively late entrant in the real estate investment scenario in the country, and joined the big league when it bought out Unitech Corporate Parks Plc. (UCP), a portfolio of six assets including special economic zones and information technology (IT) parks, in 2014 for around £205.9 million.

Acquiring commercial office assets, a sector that has fared much better than its residential counterpart over the last three years, will continue to be Brookfield’s focus.

Brookfield employs its global strategy here as well, by which it makes big acquisitions across sectors and then keeps adding assets to each of them.

In the office-space sector too, Brookfield is at an advanced stage of investing $1 billion to buy out the office and retail assets of Hiranandani Developers Pvt. Ltd in the Mumbai suburb of Powai. The office and retail space, totalling about 4.5 million sq. ft, is part of Hiranandani Business Park and Hiranandani Gardens, Mint had reported on 7 April.

“Brookfield is not really thinking on the lines of a possible real estate investment trust right now. It will hold on to its portfolio of office assets for the time being,” said the first person mentioned above.

Apart from the residential and office sectors, Brookfield is also present in the industrial realty space. Last year, it partnered with Embassy Industrial Parks Ltd, in an asset-specific deal, to develop an industrial and warehousing park on a 200-acre plot near Sriperumbudur, Chennai.

Brookfield’s global construction arm Brookfield Multiplex is also active here and is developing the UCP projects. Apart from real estate, Brookfield has also invested in India’s roads sector and is in the process of making more acquisitions in the space. Global investors, such as Blackstone Group Lp; the Government of Singapore Investment Corp. Pte Ltd (GIC), a sovereign wealth fund; and Warburg Pincus Llc were the biggest investors in real estate last year, despite a three-year-long slowdown in the sector. “Global funds have taken bets across asset classes in real estate. While debt still dominates investments in the sector, equity is gradually making a comeback based on the opportunities with good quality developers and on the expectation that when there is recovery, higher returns can be made,” said Chintan Patel, partner, deal advisory-real estate and hospitality, KPMG India. Patel said that global funds are keen to invest yet cautious, and primarily look at developers with strong corporate governance standards. (Madhurima Nandy, Livemint.com)