Home >companies >Investors, developers look to buy out malls, land to expand retail portfolio

Bengaluru: Top investors and developers are looking to buy out shopping malls and land to expand their retail realty portfolios on the back of urban India’s consumption story.

Large investments by global funds and demand for quality malls have also propelled the unprecedented expansion in this space.

Mall developer Phoenix Mills Ltd plans to acquire two land parcels under its investment partnership with Canada Pension Plan Investment Board (CPPIB) by mid-2018, bringing around four assets under the platform. Since the CPPIB tie-up last April, when the Canadian investor committed to invest $250 million in a unit of Phoenix Mills, it has bought a land parcel for Rs130 crore and a partly-constructed mall in Indore for Rs230 crore. It will also add 400,000 sq. ft to its million sq. ft mall in Bengaluru. “2018 is a year of huge consumption growth. We have already achieved Rs3,000 crore of sales (from our malls) between April-September, compared with Rs5,800 crore in FY16-17," said Shishir Srivastava, joint managing director, Phoenix Mills.

The firm plans to double its 6 million sq. ft portfolio in the next five years or so.

In November, APG Asset Management NV invested $175 million in Virtuous Retail South Asia Pte Ltd (VRSA), a joint venture with Xander Group Inc., for acquisitions and new project developments.

Rohit George, executive managing director and chief investment officer of VRSA, said the firm is in active discussions on a couple of large transactions to buy under-construction malls and, selectively, operational malls. It will add at least one new asset this year. The Chennai mall will also be operational in April-May. “In the next 24 months, we are actively looking to build the portfolio. We are in talks for acquisitions in Hyderabad, Kolkata, Delhi and Mumbai," said George.

An estimated 34 malls will come up by 2020, totalling 13.6 million sq. ft. Of this, 25 malls may open in 2018, based on developer timelines received, said property advisory Cushman and Wakefield. Only six malls opened in 2017.

In the last year, Blackstone Group LP’s India subsidiary Nexus Malls has increased its portfolio from 2.8 million sq. ft to 5 million sq. ft across eight malls.

Nirzar Jain, senior vice-president, operations, Nexus Malls, said it is looking at new additions this year as well.

DLF Ltd, which unveiled The Chanakya mall in Delhi last year, built on the lines of its other luxury mall Emporio, operates both premium and luxury malls. “After the success of Mall of India, we are creating a scalable model, through organic and inorganic growth. We are planning to add one mall to grow the premium mall vertical this year," said Pushpa Bector, executive vice-president & head, DLF Premium Malls.

Prestige Group launched its first mall in Mysuru in January, will launch one in Bengaluru and is rebranding a mall in Udaipur and may relaunch it, said Suresh Singaravelu, executive director-retail, hospitality and business expansion.

Prestige acquired the Udaipur mall when it recently bought CapitaLand Ltd’s stake in various shopping mall projects for Rs342 crore. Brigade Enterprises Ltd, too, is looking at suitable land and plans to add one mall every 2-3 years.

Retail sales were hit by demonetization and the implementation of the goods and services tax in 2017. Still, the prospects for the retail space are bright, said analysts at Edelweiss Securities Ltd.

“India’s organized retail tale is set for a fortunate twist and catapult to $166 billion (sector revenue) by FY25 from $55 billion in FY16. Favourable macros—improving consumer sentiments, rising disposable incomes, urbanization and lower penetration of organized retail—are envisaged to primarily fuel this boom," the analysts wrote in a 8 January report.

“Retail real estate has undergone consolidation and only those with financial appetite and management expertise are in the business. Going forward, we are going to see better quality malls," said Pankaj Renjhen, managing director-retail services, JLL India.

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