The success of Brookfield India Real Estate Investment Trust in raising ₹2,000 crore through its first issuance of sustainability-linked bonds is a milestone in the achievement of a financial objective. This is a strategic step that is critical to the trust since, as it grows its presence in the Indian commercial real estate market, it is harmonising its financial policies with the international environment and social governance requirements. The issuance, which was executed through a private placement of non-convertible debentures, highlights the maturing nature of the Indian REIT market and the growing demand among institutional investors for high-quality, ESG-compliant debt.

Successful fundraising and anchor investment

One of the key aspects of this effective fundraising campaign was the involvement of the International Finance Corporation, a constituent of the World Bank Group, which became the anchor investor for the bond offering. The presence of such an international development institution is a powerful source of confirmation of the working model and ability of Brookfield India REIT to be sustainable in its operation.

The bond issuance, in association with the International Finance Corporation, was associated with a stable involvement of a wide range of local and foreign institutional investors. This broad following shows the confidence of the market in the capacity of the REIT to handle big commercial properties and be able to keep a tight financial framework.

The particular conditions of the issue are a highly competitive quarterly dividend rate of 7.06% per annum. The bonds will be designed as five-year tenure bonds, which will provide the REIT with long-term and stable capital to fund its current initiatives. According to the official allotment details, the trust has issued 2,00,000,000 sustainability-linked, listed, rated, secured, and redeemable, non-convertible, and non-tradable, with and face value of ₹1,000 000, as per the details provided in the allotment.

Although the initial size of the problem was ₹2,000 crore, the amount actually considered was about ₹1,996.92 crore with a common discount. It is proposed that these debentures will be listed in the wholesale debt market segment of the BSE, and the participating investors will enjoy transparency and liquidity.

Commitment and portfolio expansion

The funds of this ₹2,000 crore issue of bonds will be utilised in diverse corporate strategic needs. Regulatory filings indicate that the primary use of the capital will be to offer shareholder loans to certain select REIT assets of the Brookfield portfolio and for the general corporate needs.

This infusion of cash is especially opportune considering that it has come after a recent equity raise of ₹3,500 crore in the form of a Qualified Institutional Placement that happened earlier this month. The above fundraising efforts show that Brookfield India REIT is a highly advanced capital manager that adopts a moderate combination of debt and equity to drive its aggressive growth model.

One of the factors that has contributed to this increased capital raising is the aggressive growth program of the trust, which was symbolised by the historic acquisition of Ecoworld in Bengaluru. In this case, a staggering ₹13,125 crore is being spent to acquire this office campus that is spread over 48 acres covering an area of 7.7 million square feet. This is the biggest deal that has been announced to have been purchased by any REIT in India.

With such a huge capital base, which is approximately ₹10,000 crore in the last twelve months, Brookfield India REIT is in a position to effectively add these high-value assets to its current portfolio. This has led to a high growth rate that has seen the holdings of the REIT grow to 11 properties within a very short time since the first listing of the company, as the holding had only four assets would have taken years to reach the current position.

The difference with this particular issuance of bonds is that it is a so-called sustainability-linked issue: its financial conditions are targeted on the fulfilment of certain environmental and social performance metrics. The issuance was made in accordance with Brookfield India REIT Sustainability-Linked Finance Framework, which is aimed to correlate with the Sustainability-Linked Bond Principles defined by the International Capital Market Association.

The framework complies with the ESG debt framework as required by the Securities and Exchange Board of India. In order to provide credibility and materiality of the performance targets, Bureau Veritas gave an independent Second Party Opinion, which confirmed that the sustainability targets of the REIT are material and meaningful.

This responsibility towards ESG is not just a financial strategy, but it is the basis of its long-term value creation by the REIT. The presently existing 100% institutional administration office REIT in India, Brookfield India REIT, manages a portfolio of 10 Grade A properties in major metropolitan markets such as Mumbai, Delhi, Gurugram, Noida and Kolkata.

The entire portfolio has 29.1 million square feet of leasable area, of which 24.6 million square feet is operational space, 0.6 million square feet of which is under construction and about 4 million square feet of which is potential development. With the introduction of renewable energy, circular economy and low-carbon designs into these mega office parks, the trust expects to minimise its overall environmental performance and provide its multinational tenants with high-quality, energy-saving spaces.

Conclusion

The achievement of ₹2,000 crore of sustainability-linked bonds is a major win for Brookfield India REIT and the Indian real estate investment environment as a whole. The trust has maximised its borrowing costs by diversifying the capital structure and using the bond market due to its competitive 7.06% coupon.

The move is backed by the anchor investment of the International Finance Corporation, which gives it the ammunition it needs to make huge acquisitions such as the Ecoworld campus without compromising its commitment towards sustainable growth. With office leasing business still strong in each of the major cities in India, and with Brookfield taking the lead in capital raise and integration of ESG, the company is well-positioned to lead the institutional real estate market in providing long-term value to its investors by offering a quality, sustainable, and environmentally responsible portfolio of assets.