REITs: JM Financial bullish on Embassy, Mindspace and Brookfield India; sees up to 16% upside – key reasons

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Embassy Office Parks REIT: The brokerage is bullish on the stock with a target price of ₹340, indicating an upside of almost 11 percent. The growth drivers for Embassy are an expansion of operational area (6.9msf to be commissioned by FY26E), contractual rent escalations (12-15 percent increases every 3 years), reversion of rentals to market levels (11-29 percent higher), and lease-up of vacant offices, said the brokerage. Embassy Office Parks REIT owns Asia’s largest office portfolio on a leasable area basis, which is currently at 45.0msf (34.3msf operational, development pipeline of 7.9msf & 2.8msf of forthcoming projects).

Its office assets are majorly located in the high absorption office markets of India. It has a quality portfolio: nearly half of its tenants are Fortune 500 companies (47 percent), 81 percent are MNCs and the weighted average lease expiry (WALE) is 6.6 years, noted JM. The portfolio growth builds reliably from lease-up of vacant areas, contractual escalations, MTM rental revisions and new developments.

It expects net operating income (NOI) to accumulate at 10.9 percent CAGR over FY23-26E. Brookfield India Real Estate Trust: The brokerage has a ‘buy’ call on the stock with a target price of ₹280, implying an upside of over 16 percent. "With improving physical occupancy at all offices and strong hiring across IT/services/captives over the past 18 months, demand for office space should recover eventually.

We estimate BIRET’s portfolio-wide occupancy to go to 90 percent by FY26E from 83 percent as of the end of FY23. BIRET has always enjoyed high occupancy (peak of 96 percent in FY20) before Covid-19. Accordingly, we estimate Gross Rentals/Distribution per Unit to grow at FY24-FY26E CAGR of 5.8