An affiliate of global private equity firm Warburg Pincus Llc and Mumbai-based developer Runwal Group have formed a joint venture (JV) to create a shopping mall platform.
Both partners will commit $200 million each in the form of equity and raise another $600 million in debt to create a corpus of $1 billion to invest in and develop shopping malls across tier 1, 2, and 3 cities in India, which have a sizeable population and growing disposable income.
The platform will look to build large, destination malls, as well as smaller hypermarket and cinema-anchored community malls.
This is Warburg Pincus’s first investment in the retail development sector in India, after putting ₹1,800 crore in Piramal Realty for the latter’s residential business and $250 million in Embassy Industrial Parks Pvt. Ltd.
The Warburg Pincus affiliate and Runwal Developers Pvt. Ltd will each hold a 50% stake in the platform. Sanjay Dube has been appointed the chief executive officer (CEO) of the new venture.
The platform will be seeded with several projects, which are under development, and will also have the option of acquiring some of Runwal Group’s operational retail malls. The JV partners are looking to acquire both greenfield and brownfield projects.
“...The retail real estate sector is expected to see tremendous growth driven by the lack of community spaces in Indian cities and the growing disposable income resulting in greater spend on entertainment and branded retail," said Sandeep Runwal, managing director Runwal Group.
“We look forward to working closely with Warburg Pincus and leveraging their successful experience in helping create market leading platforms in the retail mall space in other parts of Asia," he said.
The Runwal Group already operates four malls in Mumbai, with a total leasable area of around two million square feet (sq. ft). These include its flagship R-City mall in suburban Ghatkopar, with a total leasable area of 1.2 million sq. ft.
“With a growing middle class and expansion of branded retail, shopping malls present a meaningful opportunity to participate in India’s evolving consumption story," said Anish Saraf, managing director, Warburg Pincus India.
“Runwal Group’s strong retail knowledge and operational experience, together with Warburg Pincus’s ability to support creation of market leading enterprises, will enable the JV to benefit from India’s long-term growth potential and become the country’s pre-eminent retail mall platform," said Saraf.
It is a logical progression for an investor such as Warburg Pincus to venture into the shopping mall space in India, said Shobhit Agarwal, managing director and CEO, ANAROCK Capital.
“Shopping malls and retailers are doing well. The consumption story is intact and, by now, we know that the e-commerce wave has not really disrupted brick-and-mortar retail. As India’s real estate sector becomes more transparent and mature, we will see more and more institutional investors coming in," Agarwal said.
Top investors and developers have been buying shopping malls and land to expand their retail realty portfolios on the back of urban India’s consumption story. Phoenix Mills Ltd has an investment partnership with Canada Pension Plan Investment Board (CPPIB), APG Asset Management NV has invested in Virtuous Retail South Asia Pte. Ltd and Blackstone Group Lp’s India subsidiary Nexus Malls has been growing its portfolio.