Green shoots emerge for commercial real estate: Here are ICICI Securities’ top picks

SUMMARY

The commercial real estate developers have clocked over 90 percent office rental collection between March - September 2020 and have seen pickup in pre-leasing enquiries from June 2020. Rents also continue to sustain at pre-COVID levels for large, institutional landlords. Analysts expect a few green shoots for the sector in Q3CY20.

By Ankit Gohel Oct 13, 2020 1:03:42 PM IST (Published)

DLF | Buy | TP: Rs 209 ICICI Securities believes high quality tenant portfolio consisting largely of MNCs makes DLF’s portfolio resilient. The company has collected over 90 percent of office rentals between March-June 2020 from tenants.

Embassy Office Parks REIT | Buy | TP: Rs 430 The brokerage believes that the office portfolio of the Embassy REIT is relatively resilient in these tough times. As per the Q2FY21 operations update, office rental collections for Q2FY21 have remained strong with 98.5% of rentals collected as of 30th September 2020 and 99.9% collected for Q1FY21.

The Phoenix Mills | Buy | TP: Rs 780 The company plans to add on offices in under-construction Hebbal, Bengaluru mall are flexible subject to demand environment. It has collected over 85 percent of office rentals from tenants post lockdown.

Prestige Estates Projects | Buy | TP Rs 291 | 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.

Brigade Enterprises | Buy | TP: Rs 272 | Brigade has been able to achieve office rental collections of over 97 percent in the March-June 2020 period. In FY21, ICICI Securities believes 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.

Sunteck Realty | Buy | TP: Rs 303 | Sunteck was looking to build around 3 msf of office/retail space by FY23-24E with estimated capex of Rs 1,600 crore and potential rental income stream of Rs 400-500 crore. However, these plans are flexible depending on COVID impact and the company is yet to start any capex and can modify its plans if required.

Oberoi Realty | Add | TP: Rs 412 | Oberoi closed a large pre-lease deal with Morgan Stanley for 1.4 msf of leasable area in Commerz III for 9.5 years with rentals to commence in FY23E, the brokerage noted.