Begaluru: Global investment firm The Xander Group Inc., which has invested around $2 billion in India’s real estate sector, is planning to ramp up its office portfolio and buy shopping malls under its retail arm Virtuous Retail South Asia Pte Ltd (VR). In April, Xander said it bought an information technology special economic zone in Chennai for $350 million and acquired North Country Mall in Mohali under VR for $108 million.
In a telephone interview, Singapore-based Rohan Sikri, senior partner, Xander Investment Management Pte Ltd (the real estate private equity arm of The Xander Group), talked about Xander’s journey so far and investment plans.
What is Xander’s plans on the commercial office front?
We have invested more than $400 million in the current portfolio and plan to invest an equivalent amount to conclude acquisitions in our pipeline. By the end of this financial year, we expect to grow our office portfolio to about 10 million sq. ft. We have a strong pipeline of more than 3 million sq. ft and hope to achieve this target if all goes well. Our preference is 100% acquisitions, but in special circumstances, we will work with quality minority JV (joint venture) partners.
India is not an easy market to do transactions, whether you are buying or selling. There is competition (to invest) but we think the ability to execute is the key differentiator, and plays a major role in achieving returns. The office markets have grown remarkably over the last 10 years. Vacancies are gradually falling, but rental growth in real terms has actually been negative in many markets.
What is Xander’s outlook on investing in India?
We will continue to invest both capital, and in people. Our fourth India opportunity fund is now fully invested and its returns are tracking well. We will likely raise our fifth India opportunity fund later this year. This is the vehicle for our opportunistic real estate investments. Based on our analysis of current deal flow, I would anticipate the fund size to be $300-400 million.
We are cautiously optimistic about India. For most of our real estate strategies, we are a firm that likes control as hands-on investors. Over the last 12 years, we have organically built out management teams for each of our three platforms, with strong local leadership.
Xander has committed to invest over $2.3 billion in India since the government’s first initiative to allow foreign investors to invest in real estate in 2005. In 2017, we see an improved policy and regulatory regime, which encourages investors like ourselves and keeps us engaged in the Indian market.
What are Virtuous Retail’s expansion plans?
Virtuous Retail South Asia (VRSA), our JV with APG Asset Management NV, is now a 5.5 million sq. ft portfolio. We will launch VR Chennai, which is a million square feet of trading area, later this year. We will make significant capital investments in the Mohali mall, which we bought recently, to brand and align this asset with the larger VR portfolio, and we remain keen to expand the portfolio across the country.
Under Xander umbrella we also have numerous retail JVs which continue to be developed and operated independent of VRSA. These include projects in Mumbai, Pune, Bangalore among others.
Retail has been a focus area for us from 2007, when we established Virtuous Retail. So it’s safe to say that we were the first foreign investor to meaningfully address the retail asset class, as we saw it as a long-term opportunity.
India is still one of the largest untapped consumer markets of significance in the world today; the improved regulatory regime like FDI (foreign direct investment) in single and multi-brand retail, have reinforced our thesis and strategy.
How has the non-banking financial company Xander Finance Pvt. Ltd performed?
It’s been a good six years since Xander Finance started operations in India. We have done 50 transactions/originated loans of around $400 million. Our average loan size has been consistently increasing and there are no defaults in the portfolio.
This is a strong base to expand from, especially in the general corporate lending space. We may look to raise $150 million from institutional investors this year to fuel this growth in Xander Finance, apart from the strong organic growth the platform continues to see.
We are addressing the non-real estate opportunity through Xander Finance where we see substantial opportunity for growth. As you know, we have also been investing in the infrastructure sector and making direct investments in special situations both in the public and private markets. Both will continue.