ICICI Securities Top Picks In Commercial Real Estate

The Indian commercial real estate developers have reported over 90 percent office rental collection between March-June 2020 and have seen a pickup in leasing enquiries from June 2020 onwards with few large pre-COVID deals closed. As per ICICI Securities DLF company’s high-quality tenant portfolio consisting largely of MNCs makes the portfolio resilient.  The company has collected over 90 percent of office rentals between March-May 2020 from tenants. Embassy Office Parks REIT has collected 97 percent rent from tenants in April-June period. It has also achieved rental increases of 14 percent YoY in Q2CY20 on 1.8 msf across 22 office leases as per contractual escalations. Oberoi Realty currently generates over Rs 400 crore of annual rental income across offices/malls/hotels and was on track to cross over Rs 1,000 crore of annual rentals by FY23E with Borivali Mall and Commerz III office becoming operational. The Phoenix Mills has limited exposure to offices with some operational area in High Street Phoenix and Kurla in Mumbai. Upcoming rental assets in Pune may see some deferment in leasing plans, but the company has collected over 80 percent of office rentals from tenants post lockdown. Prestige Estates Projects | ADD | Target: Rs 250   |  Factoring in COVID-19 related concerns, the brokerage has cut its FY21/22E rental income estimates by 30% and 20% to Rs 800 crore and Rs 940 crore, respectively. It assumes zero mall rentals for Q1FY21 and deferment of incremental office leasing by 12 months along with zero rental escalation in FY2122E. The company has collected over 90 percent of rentals from tenants post lockdown and was also able to complete a 0.9 msf lease deal with Accenture in its Star Tech, Koramangala project in Bengaluru. Prestige Estates Projects has collected over 90 percent of rentals from tenants post lockdown and was also able to complete a 0.9 msf lease deal with Accenture in its Star Tech, Koramangala project in Bengaluru. Brigade Enterprises has been able to achieve office rental collections of over 95 percent in the March-May 2020 period. In FY21, the focus will be on incremental office rentals from World Trade Centre, Chennai, where rentals are expected to commence from Q4FY21 and the Tech Gardens, Bengaluru, which is already earning partial rentals.