CPPIB to invest $250 million in Phoenix Mills unit

CPPIB to initially own 30% in Phoenix Mills’ Island Star Mall with an equity commitment of Rs724 crore


Photo: Hemant Mishra/Mint
Photo: Hemant Mishra/Mint

Canada Pension Plan Investment Board (CPPIB) will invest as much as $250 million in Island Star Mall Developers Pvt. Ltd, a unit of Phoenix Mills Ltd.

A joint announcement by CPPIB and Phoenix Mills said Canada’s largest pension fund will initially own 30% in Island Star Mall with an equity commitment of approximately Rs724 crore.

The pension fund plans to invest a total of approximately Rs1,600 crore (approximately $250 million) in multiple tranches, to eventually own up to 49%.

Island Star owns Phoenix MarketCity Bengaluru, a mall which opened in 2011, with gross leasable area of 1 million sq. ft.

The mall is located Bengaluru’s Whitefield locality, a residential and commercial area.

The funds will be used for acquiring and developing both greenfield assets on newly purchased land banks, as well as existing operating retail assets.

Phoenix Mills will manage all development and operational assets in Island Mall.

This is a first-of-its-kind transaction for India’s retail real estate industry, said Atul Ruia, joint managing director at Phoenix Mills, adding that CPPIB brings significant experience and expertise in creating and managing retail assets across the globe.

Phoenix Mills is a real estate developer and operator with approximately 6 million sq. ft of retail space across eight malls in six cities. It has developed assets of over 17.5 million sq. ft spread across retail, hospitality, commercial and residential properties.

CPPIB, which opened its investment office in India in October 2015, also has a partnership with Larsen and Toubro Ltd.

CPPIB had announced a commitment of Rs2,000 crore in L&T’s infrastructure asset development subsidiary L&T Infrastructure Development Projects Ltd in December 2014.

The pension fund has invested in Kotak Mahindra Bank Ltd and owns around 6.26% stake in the bank.As of 31 December 2016, CPPIB had assets worth Canadian $298.1 billion, and has committed about US$3.7 billion in India so far.

The Canadian pension fund is bullish on India as an investment destination.

“India, in the long term, is fantastic; it’s got the best profile in the world. It has got demographic growth, increase in productivity, so there’s long-term economic growth. If you look at returns on equity across markets, it’s mid to high teens over a 20-year period; so, all its long-term trends are fantastic,” said Mark Machin, president and chief executive at Canada Pension Plan Investment Board, in an interview in January.

According to real estate consulting firm JLL India, 2017 is likely to see the highest mall space becoming operational in the country, second to 2011.

“All three segments of retail—apparel, F&B (food and beverage) and entertainment and cinema—did well in 2016. High streets and malls saw more and more people eating out, which helped the F&B category. Delhi and Mumbai led this growth. Entertainment and cinema also saw a good momentum,” JLL said in a note in December.

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