MIT: Brookfield keen to establish Indian hospitality platform

The global asset manager is also looking at Indian residential to complement its existing office assets.

Brookfield Asset Management is eyeing the Indian hotels market, Ankur Gupta, the firm’s head of India, said on a panel at MIT World Real Estate Forum in Boston on Monday.

“At Brookfield, we like the story that’s building around hospitality right now,” he said. “We’re looking at hospitality as a segment where we’d like to establish a platform.”

India has suffered from hotel overdevelopment: the country has 250,000 hotel rooms, half of which were built since the global financial crisis, Gupta said. That oversupply led to a dramatic decrease in room rates. In 2004 and 2005, five-star hotels commanded $350-$400 per night, but by 2010 and 2011, one well-known luxury hotel in Mumbai dropped to just $100.

Gupta blamed that boom in new properties and subsequent poor performance on owners and operaters who lacked experience to manage through cycles.

In the last three years, however, the markets have started picking up, per a 2017 year-end report on the sector from property services company JLL. Last year marked the strongest performance for the sector since 2012, with 2017 seeing a 16 percent jump in foreign tourists year-on-year.

“This growth is attributed to a moderation in the development and opening of new hotels, complemented with stronger than average demand,” wrote Ramesh Nair, who also spoke on MIT’s panel. “We could soon be witnessing a more sustained capital flow in the change of ownership of operating hotel assets.”

Other opportunities

Brookfield entered India a decade ago but only began investing five years ago.

“For the first five years, we learned what not to do,” Gupta said.

Since then, the company has purchased six IT office parks and inked a local joint venture for commercial and residential properties, among other deals, as PERE previously reported. Now, the firm owns seven office parks that serve 14,000 employees.

“Densifying residential around these could be an interesting segment for us,” Gupta said.

In private debt, the firm already provides loans to residential developers using structured finance or preferred equity type instruments, with plans to do more such investments through a global private equity fund, Anuj Ranjan, managing partner and regional head of Middle East and South Asia, told PERE last year.

Brookfield manages $159 billion in real estate globally, according to its website.