Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable’ rating on the long-term bank facilities of Candor Kolkata One Hi-Tech Structures Private Limited (K1; a part of the Brookfield India Real Estate Trust [BIRET]).

 

BIRET is sponsored by BSREP India Office Holdings V Pte. Ltd. (a part of the Brookfield group; ‘Crisil AA/Stable’). The real estate investment trust (REIT) owns and operates an area of 243.4 lakh square feet (sq ft) as on December 31, 2024 (including the recently acquired Rostrum Realty Pvt Ltd [RRPL] assets).

 

In the first nine months of fiscal 2025, BIRET’s revenue saw a jump of 64% year-on-year, reaching Rs 2,035 crore (including 50% contribution of RRPL* assets amounting to Rs 270 crore) driven by asset acquisitions, increase in occupancy and contractual rental escalations. Net operating income (NOI) also rose by 59% (including RRPL assets), reaching Rs 1,667 crore, with an improved NOI margin of approximately 82% (including RRPL assets). As on December 31, 2024, committed occupancy was 87% (up from 80% as on December 31, 2023, on same-store basis). This is primarily driven by an increase in occupancy in the erstwhile SEZ (special economic zone), with the trust successfully getting ~14 lakh sq ft denotified post amendments to the SEZ Act. Of its total operating area, 163 lakh sq ft is under the SEZ, wherein occupancy is 83%, improved from 76% as on December 31, 2023. The occupancy is estimated at 87-89% by the end of fiscal 2025 and improved gradually, supported by a strong leasing pipeline of around 37 lakh sq ft for SEZ properties and limited expiries of around 4 lakh sq ft over the next few quarters. Furthermore, BIRET has applied for denotification of around 6 lakh sq ft of gross leasing area, which should support further improvement in overall occupancy.

 

*RRPL assets (North Commercial Portfolio) is accounted using equity method by BIRET

 

BIRET’s consolidated gross debt was Rs 12,175 crore (considering 50% of debt in RRPL assets) as on December 31, 2024. In the third quarter of fiscal 2025, the trust raised equity of Rs 3,500, majority of which has been utilised to prepay existing debt. The external loan-to-value (LTV) ratio has declined to 24.7% as on December 31, 2024, from 34.5% as on September 30, 2024, on account of significant reduction in debt. Going forward, BIRET is evaluating acquisition of assets in Bengaluru in the near to medium term which may result in availing additional debt leading to an increase in external LTV to 33-35%. A low LTV ratio protects investors from the risk of decline in property prices or operating underperformance and its impact on refinancing. Higher than the Crisil Ratings’ sensitised threshold LTV ratio of 40% will remain a key rating sensitivity factor.

 

Debt service coverage ratio (DSCR) is expected to remain adequate throughout the tenure of debt, including additional financing for capital expenditure (capex) and asset upgrades. Debt is expected to be refinanced sufficiently prior to chunky repayments due beyond fiscal 2027. Liquidity in the form of debt service reserve account (DSRA) of at least 1-3 months of peak debt obligation is to be maintained throughout the debt tenure. Cash and equivalent stood at Rs 500 crore (excluding DSRA and raised equity & RRPL assets) as on December 31, 2024. Any significant increase in debt without commensurate improvement in income or cash flow can impact the profile and will be a key rating sensitivity factor.

 

The REIT owns 12 companies, of which 10 own and operate 11 commercial office assets and a retail mall, and the remaining is the operational service provider. BIRET has entered an option agreement and share purchase and subscription agreement pursuant to which BIRET has acquired the entire share capital of Candor Techspace G1 (G1’s), property manageri.e. Mountainstar India Office Parks Pvt Ltd (MIOP), on a fully diluted basis for Rs 150.4 crore on January 7, 2025,. The quality of the portfolio stands further enhanced post the acquisition of 50% stake in RRPL (which has three wholly owned subsidiaries), collectively having five assets (two assets in RRPL and three assets with the three subsidiaries), from the Bharti group with a leasable area of 32.9 lakh sq ft and committed occupancy of 95%. The remaining stake in RRPL will continue with the Brookfield group’s private funds and BIRET will have the right of first offer to acquire the stake on or after April 28, 2026.

 

The ratings continue to reflect the trust’s stable revenue profile, benefits from geographical diversification and adequate ability to refinance owing to comfortable financial risk profile. These strengths are partially offset by susceptibility to volatility in the real estate sector, resulting in fluctuation in rental rates and occupancy.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of BIRET and its underlying special-purpose vehicles (SPVs), in line with its criteria for rating entities in homogeneous groups. This is because BIRET will have direct control over its SPVs and will support them during any exigency. After debt servicing in an SPV, excess cash flow may be made available for debt servicing of other SPVs, which may require support. The SPVs have to mandatorily distribute 90% of their net distributable cash flow (after servicing debt) to BIRET in proportion to the shareholding of BIRET. Also, as per the Securities and Exchange Board of India (SEBI) REIT Regulations, 2014, the cap on borrowing of BIRET has been defined at a consolidated level (equivalent to 49% of the value of the trust’s assets).

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Moderate LTV ratio supports ability to refinance: BIRET’s consolidated gross debt was Rs 12,175 crore (considering 50% of debt in RRPL assets) as on December 31, 2024, from Rs 10,664 crore a year ago, due to addition of RRPL asset. In the third quarter of fiscal 2025, the trust raised equity of Rs 3,500, majority of which has been utilised to prepay existing debt. The LTV ratio declined to 24.7% as on December 31, 2024, from 34.5% as on September 30, 2024, on account of significant reduction in debt. Going forward, BIRET is evaluating acquisition of assets in Bengaluru in the near to medium term which may result in availing additional debt leading to an increase in external LTV to ~ 33-35%. A low LTV ratio protects investors from the risk of decline in property prices or operating underperformance and its impact on refinancing. Higher than the Crisil Ratings’ sensitised threshold LTV ratio of 40% will remain a key rating sensitivity factor.

 

Adequate debt protection metrics: DSCR is expected to remain adequate throughout the tenure of the debt, including additional financing for capex and asset upgrades. Debt is expected to be refinanced sufficiently prior to chunky repayments beyond fiscal 2027. Liquidity in the form of DSRA of at least 1-3 months of peak debt obligation is to be maintained throughout the debt tenure.

 

Stable revenue profile of the asset SPVs: REIT owns and operates an area of 243.4 lakh sq ft as on December 31, 2024 (including the recently acquired Bharti group assets). Committed occupancy was 87% (up from 80% as on December 31, 2023, on same-store basis). This is primarily driven by an increase in occupancy in the erstwhile SEZ, with the trust successfully getting ~14 lakh sq ft denotified post amendments to the SEZ Act. Of its total operating area, 163 lakh sq ft is under the SEZ, wherein occupancy is 83%, improved from 76% as on December 31, 2023. The occupancy is expected at 87-89% by the end of fiscal 2025 and improve gradually, supported by a strong leasing pipeline of around 37 lakh sq ft for SEZ properties and limited expiries of around 4 lakh sq ft over the next few quarters. Furthermore, BIRET has applied for denotification of around 6 lakh sq ft of gross leasing area. In the first nine months of fiscal 2025, BIRET’s revenue saw a 64% year-on-year increase, reaching Rs 2,035 crore (including 50% contribution of RRPL assets amounting to Rs 270 crore) driven by asset acquisitions, increase in occupancy and contractual rental escalations. Net operating income (NOI) also rose by 59% (including RRPL assets), reaching Rs 1,667 crore, with an improved NOI margin of approximately 82% (including RRPL assets).

 

While average rentals remained at ~96 per sq ft for the portfolio owing to the impact of some expiries, rental escalations are happening as per contracts and BIRET has entered new agreements at higher rentals and has renewed some area at around 12% higher rentals during the last quarter. Impact of this will be visible in average rentals from the next quarter. The portfolio has mark-to-market upside given the superior asset and service quality, favourable location in prime areas of Mumbai, National Capital Region (NCR) and Kolkata, with good demand and competitive rental rates.

 

Weakness:

Susceptibility to cyclicality in the real estate sector: Rental collection remains susceptible to economic downturns, which may constrain the tenant’s business risk profile and, therefore, limit occupancy and rental rates. With the top 10 tenants and sectoral (information technology [IT] and IT-enabled services) concentration of rentals at 36% and 25%, respectively, as on December 31, 2024, revenue concentration risk persists. Furthermore, leases accounting for ~32% of rental revenue will be due for renewal over the next three fiscals. While majority of tenants are established corporates and may continue to occupy the property, any industry shock leading to vacancies may make it difficult to find alternate lessees within the stipulated time, as witnessed over the past few quarters. This could adversely impact cash flow and hence will be a key rating sensitivity factor.

Liquidity: Superior

Liquidity will remain strong over the medium term as the trust has low principal repayments in the next two fiscals and cash flow will be sufficient to meet debt obligation. Liquidity is supported by DSRA of ~Rs 118 crore (1-3 months of peak debt obligation in SPV loans) (excluding RRPL assets) and cash and bank balance (excluding DSRA and equity raise) of ~Rs 500 crore as on December 31, 2024 (excluding RRPL assets). Furthermore, a moderate LTV ratio enhances financial flexibility.

Outlook: Stable

BIRET will continue to benefit from the quality of its assets over the medium term.

Rating sensitivity factors

Downward factors

• Weakening of operating performance, leading to lower-than-expected occupancy levels
• Significant rise in debt resulting in Crisil Ratings-sensitised LTV ratio increasing above 40% on a sustained basis
• Significant delay in completion and leasing of under-construction assets or acquisition of assets of lower quality affecting the portfolio health
• Any impact on the independence of the operations of BIRET due to, but not limited to, change in sponsorship of the trust or ownership of the BIRET’s manager

About the Trust

BIRET is registered as an irrevocable trust under the Indian Trusts Act, 1882, and as a REIT with SEBI’s REIT Regulations, 2014, as amended. BIRET is managed by Brookprop Management Services Pvt Ltd. As on March 31, 2025, the sponsor and its group hold 26.45% of the unitholding in BIRET and the remaining is held by mutual funds, foreign portfolio investors and other public.

 

Shantiniketan Properties Pvt Ltd (N1) owns and operates a commercial office park, Candor Techspace N1, in Noida. The property has been operational since January 2011 and has completed area of 19.9 lakh sq ft, of which 98% was occupied as on December 31, 2024, while additional area of 8.6 lakh sq ft is expected to be developed in the long term.

 

Candor Kolkata One Hi-Tech Structures Pvt Ltd (K1) owns and operates a SEZ park, Candor Techspace G2, in Gurugram (Haryana). The property has been operational since 2011 and has completed area of 39.4 lakh sq ft, of which 73% was occupied as on December 31, 2024, while an additional 1.7 lakh sq ft is expected to be completed over the medium-to-long term.

 

Candor Techspace K1 in Kolkata, which is part SEZ and part commercial office park. The property has been operational since 2008 and has completed area of 31.7 lakh sq ft, of which 97% was occupied as on December 31, 2024. An IT park and mixed use-led development worth additional area of 5.8 lakh sq ft is under construction, while 21.1 lakh sq ft is expected to be developed over the medium-to-long term.

 

Festus Properties Pvt Ltd (Kensington) owns and operates an SEZ park, Kensington, in Mumbai. The property has been operational since 2009 and has completed area of 16.0 lakh sq ft, of which 96% was occupied as on December 31, 2024.

 

Seaview Developers Pvt Ltd (SDPL) owns and operates N2 in Noida. The property has been operational since 2011 and has completed area of 38.3 lakh sq ft, of which around 81% was occupied as on December 31, 2024, while an additional 7.7 lakh sq ft is expected to be completed over the medium-to-long term. BIRET acquired the asset on January 24, 2022.

 

Kairos Properties Pvt Ltd (Kairos; erstwhile Kairos Property Managers Pvt Ltd) owns and operates a portfolio of nine commercial properties in Mumbai spread across three clusters totalling 27.6 lakh sq ft, of which around 94% was occupied as on December 31, 2024.

 

G1 owns and operates a commercial office park, Candor Techspace G1, in Gurugram. The property has been operational since 2012 and has completed area of 37.5 lakh sq ft, of which around 79% was occupied as on December 31, 2024, while an additional area of 1.0 lakh sq ft is expected to be completed over the medium term.

 

RRPL and its subsidiaries, Arnon Builders & Developers Ltd, Aspen Buildtech Ltd and Oak Infrastructure Developers Ltd, own and operate a 32.9 lakh sq ft commercial portfolio primarily located in Delhi-NCR with occupancy of 95% as on December 31, 2024. Its assets include:

• Airtel Centre in Gurugram has leasable area of 6.9 lakh sq ft and was 100% occupied as on December 31, 2024.
• Pavillion Mall (retail mall) in Ludhiana, Punjab, has leasable area of 3.9 lakh sq ft and was 87% occupied as on December 31, 2024.
• Worldmark Gurugram, located in Gurugram, has leasable area of 7.5 lakh sq ft and was 97% occupied as on December 31, 2024.
• Worldmark Delhi constitutes of three assets which have leasable area of 14.5 lakh sq ft and was 95% occupied as on December 31, 2024.

 

Candor India Office Park Pvt Ltd is engaged in property management, facility management and support services for assets owned by N1, SDPL, K1 and Kairos. This entails services such as accounting, procurement of materials and services, supervision of annual maintenance contracts and insurance, transition, operations, supervision of repairs and maintenance, and legal, secretarial and compliance services.

Key Financial Indicators*

Particulars	Unit	2024	2023^
Revenue from operations	Rs crore	1781	1197
Profit after tax (PAT)	Rs crore	-3.9	131
PAT margin	%	-0.22	10.9
Adjusted gearing	Times	0.98	0.65
Interest coverage	Times	1.5	1.9

*Crisil Ratings-adjusted numbers

^Key financial numbers do not include financials for G1 and Kairos acquired in August 2023

Any other information: Not Applicable

Annexure – List of entities consolidated*

Names of entities consolidated	Extent of consolidation	Rationale for consolidation
Shantiniketan Properties Private Limited	Full	100% subsidiary
Candor Kolkata One Hi-Tech Structures Private Limited	Full	100% subsidiary
Festus Properties Private Limited	Full	100% subsidiary
Candor India Office Parks Private Limited	Full	100% subsidiary
Seaview Developers Pvt Ltd	Full	100% subsidiary
Candor Gurgaon One Realty Projects Private Limited	Full	50% subsidiary, but management control remains with BIRET
Kairos Properties Private Limited	Full
Rostrum Realty Pvt Ltd	50%	50% joint venture with Brookfield group
Mountainstar India Office Parks Pvt Ltd	Full	100% subsidiary

*As of March 31, 2025