APG, Virtuous Retail set up joint venture to acquire retail assets

Dutch investor invests 77% equity capital in Virtual Retails’s three shopping malls


The two partners will have equal representation on the board of the new company, which will be headed by Sid Yog, the founder of Xander and Virtuous Retail. Photo: Hemant Mishra/Mint
The two partners will have equal representation on the board of the new company, which will be headed by Sid Yog, the founder of Xander and Virtuous Retail. Photo: Hemant Mishra/Mint

Bengaluru: Dutch pension fund asset manager APG Asset Management NV and Virtuous Retail (VR), the retail development arm of investment firm The Xander Group Inc., have formed a joint venture that has acquired a portfolio of three shopping mall assets from a Xander-sponsored fund for about Rs2,000 crore ($300 million). This is an initial portfolio and the partners intend to acquire more retail assets.

APG has invested 77% of the equity for a majority shareholding in the joint venture and Xander has invested the remaining 23%. The two partners will have equal representation on the board of the new company, which will be headed by Sid Yog, the founder of Xander and Virtuous Retail.

Simultaneously, APG and Xander have committed an additional $150 million as equity capital, giving the new company an investment capacity of $300 million that will be used to expand the portfolio through new acquisitions and new developments.

The joint venture has integrated a 150-strong management and operational team in India, creating a new company called Virtuous Retail South Asia (VRSA).

Based in Singapore, VRSA will be the partners’ exclusive, integrated retail mall developer, owner, operator and asset manager for India.

Rohit George, who was responsible for overseeing Xander’s retail portfolio in India, has relocated to Singapore and joined VRSA as managing director and an executive director on the board.

“This is a landmark transaction for Indian retail real estate at a time when the sector is at an inflection point,” said Sachin Doshi, managing director and head of private real estate investments for Asia-Pacific at APG.

“With the arrival and expansion of major global and domestic brands, coupled with the severe shortage of high quality malls, we believe organized retail is in early stages of take-off in the country. This transaction allows us to get immediate scale and access to a portfolio of dominant shopping centers and management capability through the integration of VR’s Indian management and operating platform into VRSA. We are also delighted to expand our relationship with Xander and look forward to growing VRSA together into a leadership position in India’s emerging retail landscape,” Doshi said in a statement.

In 2014, Xander and an investor consortium led by APG said they will invest $300 million through a venture that will buy income-generating, commercial office assets in big Indian cities.

The initial portfolio comprises 3.5 million sq. ft across three shopping centres developed by VR in Bengaluru, Surat and Chennai that will continue to operate under the VR flag. The company will expand its national portfolio of dominant retail-anchored lifestyle projects by adding centres in key markets, including the National Capital Region of Delhi, the Mumbai Metropolitan Region, and Hyderabad.

“By partnering with APG, a likeminded long-term investor, we take a big leap forward in the evolution of VR’s Indian platform. The transaction creates a self-managed operating company, in line with successful global trends of well capitalized ventures with clearly defined strategies, not limited by fund life. This is exactly in line with our 2007 vision, when we set up VR in India, which is deeply satisfying,” Yog said.

In March, Godrej Properties Ltd raised $275 million for Godrej Residential Investment Program II (GRIP-II), a pool of capital to invest in residential projects, from a clutch of investors with APG as the lead investor. Global investors and real estate developers are looking to invest significantly in buying and building new shopping malls, as demand outgrows fresh supply, the e-commerce euphoria wanes and they look to diversify their portfolios.

Two of the biggest private equity deals this year were in the retail sector. Blackstone Group agreed to buy 1 million sq. ft of retail space in L&T Realty Ltd’s Seawoods project in Navi Mumbai for Rs1,450 crore, and sovereign wealth fund GIC bought a 49% stake in Viviana Mall in Thane, near Mumbai, at an enterprise value of about Rs1,300 crore.

“We are likely to see more large deals in retail. These deals are a win-win for both investors and developers, where the former buys into the few high quality, income generating retail assets that are there and this helps developers reduce debt and look at expansion selectively,” said Somy Thomas, managing director (valuations and advisory) at property advisory Cushman and Wakefield India.

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