Revised framework for computation of Net Distributable Cash Flow (NDCF) by Real Estate Investment Trusts (REITs)
Summary
This circular establishes a revised standardized framework for computing Net Distributable Cash Flow (NDCF) by Real Estate Investment Trusts and their HoldCos/SPVs. The new framework supersedes previous guidelines and becomes applicable from April 1, 2024, to promote ease of doing business. It details specific computational methods at both the SPV/HoldCo level and the Trust level, including adjustments for income, expenses, and reserves.
Text
Regulation 18(16) of SEBI REIT Regulations provides that NDCF shall be computed at the level of REIT and HoldCo/SPV with minimum distribution of 90% subject to Companies Act or LLP Act provisions.
In order to promote Ease of Doing Business, it has been decided to standardize the framework for calculation of available Net Distributable Cash Flows as per Annexure A.
The revised framework shall be applicable with effect from April 1, 2024 and supersedes the Framework for calculation of Net Distributable Cash Flows provided in Paragraph F of Chapter 3 of the Master Circular dated July 06, 2023.
NDCF at HoldCo/SPV level is computed starting with cash flow from operating activities, adding treasury income, proceeds from sale of assets adjusted for taxes/debts/costs/reinvestment, and subtracting finance costs, debt repayment, required reserves, and capital expenditure.
NDCF at Trust level is computed starting with cashflows from operating activities, adding cash flows from SPVs/investment entities, treasury income, proceeds from sale of assets adjusted for taxes/debts/costs/reinvestment, and subtracting finance costs, debt repayment, required reserves, and capital expenditure.
NDCF computed at SPV level for a particular period to be added under this line item, even if the actual cashflows from SPV to REIT has taken place post that particular period, but before finalization and adoption of accounts of the REIT.
The option to retain 10% distribution under Regulation 18(16) needs to be computed by taking together the retention done at SPV level and Trust level.
Trust along with its SPVs needs to ensure that minimum 90% distribution of NDCF be met for a given financial year on a cumulative periodic basis as specified for mandatory distributions in the REIT regulations.
No Trust or SPVs can distribute any cashflows by obtaining external debt, except to the extent clarified in note 2 above, excluding working capital / OD facilities squared off within the quarter.
Cash flows received from SPV’s / Investment entities which represent distributions of NDCF computed at the Trust level for further distribution to Unitholders shall exclude any such cash flows used by the Trust for onward lending to any other SPVs / Investment entities.
Source: SecMarx — Revised framework for computation of Net Distributable Cash Flow (NDCF) by Real Estate Investment Trusts (REITs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.