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Atul Ruia | Staying realistic about real estate

Atul Ruia | Staying realistic about real estate
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First Published: Fri, Feb 06 2009. 09 38 PM IST

Realty check: Ruia scouts malls all over the world for design ideas. Jayachandran / Mint
Realty check: Ruia scouts malls all over the world for design ideas. Jayachandran / Mint
Updated: Fri, Feb 06 2009. 09 37 PM IST
It’s hard to believe that Mumbai’s Phoenix Mills was once perceived as a low-end destination. The mill-to-mall story has been much written about—financial troubles, labour problems and regulation, all came in the way of developing High Street Phoenix at Phoenix Mills. The mill was closed in 1996 and the transformation began in 2000, when Big Bazaar opened.
As I sip my lemon tea at the Barista inside the complex and wait for Atul Ruia, director, Phoenix Mills Ltd, my mind goes back about eight years to the first sale at the hypermarket—the long queues snaked all the way to the main road. Back then, Fire ‘n’ Ice was the place to party at for young college students and Bowling Co. was where we used to hang out after bunking lectures.
Realty check: Ruia scouts malls all over the world for design ideas. Jayachandran / Mint
As Ruia enters Barista, declines the offer of coffee, sits down, changes his mind and orders a cappuccino, I have an important question for him—why hasn’t another discotheque like Fire ‘n’ Ice opened at Phoenix Mills? “There’s Play!” he says. I look at him incredulously. “Ok, maybe it’s not in the same category. Maybe it was my mistake to shut it down. It had its own charm,” he admits.
According to him, Fire ‘n’ Ice “had had its day” and was due for an upgrade. But since then, the complex has seen one club after another—Aziano, Lush, Ra—shut down. “I am a little older now so (I’m) less in tune with the clubbing scene. But we’ll do one or two sexy nightclubs in Phoenix,” Ruia promises.
Since its opening, Phoenix has always been a work in progress. There’s always a shop downing shutters or outlets under construction. “And it’ll never end,” Ruia jokes. He explains that at the time of opening, his desire was simply to have three products—one discotheque (Fire ‘n’ Ice), one entertainment complex and bowling centre (Bowling Co.) and one restaurant (Soul Curry). Then they added bits and pieces: Big Bazaar, department stores Lifestyle and Pantaloon, and premium label shopping centre Skyzone. It was then that Ruia “realized it’s a good time to rethink the whole development, plan it properly and add a lot more infrastructure”.
The third phase, nearing completion, will have a five-star Shangri La hotel, a luxury mall called Palladium, parking for around 3,000 cars and a health club, besides the just-opened PVR cinema complex.
Phase 4 of the mall, that starts this year, will relocate Big Bazaar, increase the parking, add another small hotel and more stores. “Phase 4 is the last piece in the jigsaw, and once that’s ready, the whole development will be a seamless circulation,” says Ruia as I watch his cappuccino come to our table at this self-service café.
Ruia is a small man, and dressed as he is, in a multicoloured striped shirt and beige trousers, would not be easy to spot in a crowd. I wonder if everyone at Phoenix knows him. “Not at all. This guy at Barista knows me because once I came to get coffee here and didn’t have cash, so I had to explain to him who I am so he would give me credit,” he says.
Ruia’s wife Gayatri helped set up Skyzone and also started Mogra, a designer-wear store, there. At present, she is the business development director for Palladium. While travelling the couple likes to visit the biggest malls in places such as Dubai, Hong Kong and Singapore to keep up with the latest in mall design and architecture.
The latest project on Ruia’s plate is a “market city” in Kurla, Mumbai. “That’s the mother of all malls, very different from Phoenix because it’s a planned development and will open at one stroke,” he says. A 4.5 million sq. ft mall, with a Marriott hotel, a 14-screen cinema, 51 restaurants and “every single brand you can conceive of”, it promises to live up to its tagline—A day well spent for family. “Going to a mall is now a family outing. Indians will get into the shopping culture and they should. It’s a sign of prosperity.”
But doesn’t all this sound too ambitious right now? In times when realty projects lie half-built and people are cutting expenses.
Ruia, who has a ringside view of both real estate and retail, takes his time to respond, choosing his words carefully. He divides the current problem into three parts: “First, is the customer shopping? And, are people getting laid off?” According to him, recession hasn’t affected 95% of India and, surprisingly, shopping at High Street Phoenix has not been impacted.
“Second, are retailers expanding? Do they have money to expand?” he asks, sipping his coffee. According to him, that’s the bigger challenge because retailers are scaling back expansion plans, renegotiating rents—and some are not paying rents at all.
According to Ruia’s calculations, retailers cannot pay more than 10-20% of their sales as rent, while hypermarkets cannot afford more than 5-7%. “As long as your retailer is willing to give you that, in the long term it’s all good. Three years you may do badly, but the sixth or seventh year you’ll do better.”
The third part of the problem is a dramatic increase in the number of shopping centres. “I believe at least seven out of 10 shopping centre constructions have now come to a standstill. In the longer term, this will save the shopping centre industry.” Ruia says the great shopping construction boom is over—what stands built now will be it.
So Ruia, whose company has 15-20 shopping centres under construction, is placed well for the eventual bounce-back. “I’ll build out all the damn malls,” laughs he. “I’m very happy with everything that’s happening; finally there’s some sanity in the world. I think we’re in a much saner world than we were in 2007; 2009 is much better because this is our return to sanity.”
I wonder if reiki or yoga is the secret of his optimism at a time when developers are craving credit and lobbying for bailouts all around.
He says it’s because he doesn’t worry too much. “For me, it’s a long-term play. If you are unable to lease a shopping centre, I don’t think the world will come to an end. 2009 will be tough and 2010 will be tougher, but I believe by the year 2011, things will start getting better.”
He explains his theory: You raise capital in good times and build in the bad. “So it’s working out perfect for us. We’re building now and, hopefully, the malls will start operating when the times are improving. If I’d done it the other way, bought land and was trying to raise capital now, I would be going bananas,” Ruia laughs. Now, he’s just hoping that people continue to shop.
Ruia and his family don’t like shopping, though. Ruia says he is a big movie buff and loves to party and work out, but his “work and kids combined have dampened his enthusiasm for the rest”. These days, he spends his free time with his two young children—going to the park, movies and the hobby store, Hobby Ideas. “Do you take them to malls?” I ask. “No, I want them to grow up simpler, with a balanced upbringing. In fact, none of us in the family like to shop. Funny, isn’t it?”
Curriculum Vitae | Atul Ruia
Born: 26 February 1971
Education: Ruia has a double master’s degree in chemical engineering and finance from the University of Pennsylvania and Wharton School of Finance, US
Current designation: Director, Phoenix Mills Ltd
Work profile: He started as a management trainee at Phoenix Mills Ltd in 1994 and became director in 1997
Favourite restaurants: Wasabi, at Taj Mahal Palace and Tower, and Shiro, Mumbai
Life’s thrills: Eating a great meal, watching movies and seeing great works of architecture, besides spending holidays in the lap of nature
rachana.n@livemint.com
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First Published: Fri, Feb 06 2009. 09 38 PM IST