Investors in 2016 either acquired malls, or partnered with firms to build new ones
Bengaluru/Mumbai: Investors across the globe shopped for some of the best malls across Indian cities this year, signalling an increasing interest in retail real estate as they bet on long-term gains from the country’s booming consumer economy.
Marquee investment and pension funds such as Blackstone Group Lp, GIC , APG Asset Management NV and Canada Pension Plan Investment Board (CPPIB) have either acquired operational shopping malls, or are partnering with developers here to build new shopping malls or to buy other brownfield assets.
Retail was not a category investors looked at before relaxation of foreign direct investment (FDI) norms in November 2015, as global investors were barred from buying existing retail malls or assets.
“Unlike Xander, which set up Virtuous Retail to undertake ground-up development of retail centres, other global investors did not want to invest at the development stage as large format retail is extremely specialized,” said Sid Yog, founder of investment firm The Xander Group Inc. and its retail arm, Virtuous Retail (VR).
Yog said it’s a new asset class that has opened up for investors in India and those looking for yield are now also considering retail, especially since institutional quality assets, even in the office and warehousing space, for acquisition remain relatively scarce.
In November, Dutch pension fund asset manager APG and VR formed a joint venture to acquire 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.
Capitalizing on relaxed FDI norms, rising disposable income and large market potential, institutional investors are eyeing retail assets with greater interest. This year is expected to witness private equity investments of about Rs4,200 crore in retail assets—the highest level since 2008, said a 22 December note by property consultant Cushman & Wakefield.
Driven by the increased demand from retailers, the top eight Indian cities witnessed 10 malls becoming operational —amounting to 5.31 million sq. ft of mall space till September this year, marking the highest number of malls becoming operational since 2012.
After acquiring the largest commercial office portfolio in India, Blackstone Group has also started buying malls now. In December, it bought a 50% stake in Pune Westend mall for Rs600 crore and earlier this year, bought a million sq. ft of retail space in L&T Realty Ltd’s Seawoods project in Navi Mumbai for Rs1,450 crore.
“The reason funds are chasing malls is because of lack of availability of investable assets in office. Most large office owners are waiting for a REIT,” said Ramesh Nair, chief operating officer at property advisory JLL India. A REIT or real estate investment trust is a listed entity that primarily invests in leased office and retail assets, allowing developers to raise funds by selling completed buildings to investors. “We have 720 malls in the last 17 years and only 99 of them are of superior quality. Mall supply over the years has drastically reduced,” Nair said. “While demand is 10-15 million sq. ft per year, supply is only about 5-7 million sq. ft per year.”
Mumbai’s Oberoi Realty Ltd is planning to set up a retail platform, where it will partner with investors.
“…That retail platform will be owned by Oberoi Realty. We will be happy to look at investors at two levels—either at platform or project level depending on how the opportunity turns out,” said chairman and managing director Vikas Oberoi. He said the aim to form a REIT is one of the biggest driving forces behind investors chasing retail assets. It is also setting up a separate mall vertical and is building two malls in Mumbai, investing $200-$250 million, in addition to one mall it operates.
Foreign investors have focused on large cities to buy commercial office and residential assets so far, but due to limited top grade retail assets, they are now also investing in tier II cities.
“The opportunities to buy retail assets in large cities is higher compared to moderate scope in tier II cities. We are looking to build a couple of new malls and acquire operational assets in both tier I and II cities, because we think we can operate them better and add value,” said Atul Ruia, joint managing director, Phoenix Mills Ltd.
CPPIB is in the process of picking up a stake in Phoenix’s subsidiary, that runs the Phoenix MarketCity mall in Bengaluru. Ruia declined to comment on the transaction.
Mumbai-based K. Raheja Corp., which runs the Inorbit chain of malls, is also planning to double its retail portfolio to five million sq. ft of leasing space in the next five years.
“Today, there is a clear cut segregation between good and bad malls and a few quality assets have stabilized and continue to do well. Funds have confidence in certain quality of retail assets and see that this is not a struggling asset class in India,” said Rajneesh Mahajan, executive director, Inorbit Malls India Pvt. Ltd.
Xander’s Yog said it takes a lot of time and a lot of equity capital to build a good mall and one needs deep equity pockets to build quality retail in India.
“Additionally, you need patience. With classic Indian execution issues, it could take up to 5-7 years to build a retail mall of scale and then another 3 years for them to stabilize. Most developers are in the cash churn business and thus it doesn’t work for them, and some investors have that kind of time horizon,” he said. “For many large investors, it’s an opportunity to diversify their portfolios and developers are willing to build more malls now because they have funding and an exit option,” said Vivek Kaul, head-retail services, India, CBRE South Asia Pvt. Ltd.
Indiabulls Real Estate Acquires A Commercial Building With Leasable Area Of 2.5 Lakh Sq Ft. In Gurgaon
Indiabulls Real Estate has earned a distinct reputation for building projects that turn spaces into inspiring places, since its inception. Indiabulls Real Estate went on to expand its projects portfolio, with its prime focus on construction and development of residential, commercial & SEZ projects, across major Indian Metro cities. Today Indiabulls Real Estate is ranked amongst the top Real Estate companies with a total Gross Development value of INR 32,189 crores and net worth of INR 5,480 crores as of 2017.
Indiabulls Real Estate has commercial development with a leasable area of 3.15 million sq.ft. under construction. Further, it has a land bank of 1,046 acres and also possesses 2,588 acres of SEZ land at Nasik, Maharashtra. In 2014, the company acquired the prime property, 22 Hanover Square in Central London for Rs.1630 Cr. The group has also been conferred the status of a Business Super brand by the brand council Superbrands, India. Indiabulls Real Estate is known for its successful delivering of superior products, services to its customers, partners and shareholders.
Indiabulls Real Estate is planning to acquire a large commercial building with a leasable area of 2.5 lakh sq ft in Gurgaon.
To acquire this large area of prime and newly constructed commercial building, Indiabulls Real Estate’s wholly-owned subsidiary has entered into a definitive and a binding agreement. A BSE filing by the Indiabulls reveals that, the deal has an expectancy period of four months, mainly after receiving the Occupation Certificate of the building. Although the name of the seller and deal value was not disclosed.
With many leading multi-nationals operating in the vicinity, makes it a developed prime commercial location. Equipped with an additional leasable area, the company expects to enhance its annuity revenue to Rs 1,450 crore in FY 20-21 from the rental properties portfolio of Indiabulls Real Estate.
With its expansion spree, Indiabulls Real Estate, is counting on the revival in the real estate market in Gurgaon for making its project a success. The commercial realty market is witnessing a strong demand in Gurgaon. So Indiabulls Real Estate is looking forward to set up a state of the art business park in Gurgaon, which would be able to draw reputed corporates and MNCs. As some big-ticket commercial space rentals and deals are expected to be finalized in this space.
Adani’s Bandra-Kurla Complex Project To Be Taken Over By Shapoorji Arm For Rs 2,000 Crore
Shapoorji Pallonji Investment Advisors which is an investment arm of conglomerate Shapoorji Pallonji Group is set to acquire a commercial project Inspire BKC from Adani Realty in a nearly Rs. 2,000-crore transaction. The project is located in Mumbai’s business district Bandra-Kurla Complex (BKC), informed two persons familiar with the development.
Shapoorji Pallonji Investment Advisors has emerged as the frontrunner from a total seven shortlisted interested entities including US-based private equity major Blackstone Group and an alliance between Qatar Investment Advisors (QIA) and Bengaluru based realty developer RMZ. For this over 8 lakh sq ft project Shapoorji Pallonji Investment Advisors has already completed the due diligence process.
One of the people mentioned above said, “The due diligence process for the asset has been concluded recently, and currently the final documentation is going on. The deal is expected to be concluded soon as both the parties have frozen the structure of the transaction.”
The project has recently been completed and the developer is in the process of receiving few civic approvals, following which it will be concluded. Adani Realty is also one of the companies that is working on closing few leasing transactions here.
In one such lease deals, Swiss multinational pharmaceutical major Novartis’ India arm has entered into an agreement to pick up over 1lakh sq ft office space in this commercial project. This was one of the largest front office commercial transactions in terms of space in the Mumbai in 2017.
Shapoorji Pallonji Investment Advisor is also kept in the loop on the progress of space leasing transactions in this commercial project.
In its first-ever real estate related engagement in India in October the global insurance and asset management major Allianz Group teamed up with Shapoorji Pallonji Group to create an investment platform for office properties.
The platform, SPREF II, will be a Singapore-domiciled, rupee-denominated and close-ended fund planning to raise $500 million in equity.
After partnering with the Canada Pension Plan Investment Board (CPPIB) in 2013 for a platform with an initial target corpus of $200 million this is Shapoorji Pallonji Investment Advisors’ second such tie-up.
The commercial real estate has been registering a healthy growth across prime office markets in past three years.
Japyee’s Yamuna Expressway Sees A Bidding By Tata Housing And Lodha
Jaypee Infratech shares saw a jump of nearly 10 per cent in Monday’s trade after some of the major developers like Tata Housing and the Lodha Group, filed initial bids for the debt-laden realtor and road builder.
These two real estate giant have shown their keenness to own Yamuna Expressway, a project by Jaypee Infratech, the fate of which is now being decided at the Supreme Court. Also the other major participant is the country’s dedicated platform for insolvency resolution, the National Company Law Tribunal (NCLT).
Being the prime concrete road project, Yamuna Expressway starts at the eastern end of Noida-Greater Noida Expressway and runs up to Agra. A toll of slightly more than Rs 2 per kilometre is being charged by the Yamuna Expressway, for every car. An extensive land bank makes the property’s richest attraction, with facilities that are either proposed or already functioning in the immediate vicinity of the access-controlled motorway.
Yamuna Expressway is one such major structure sharing the connectivity with some of the important landmarks in the state. One such architecture is India’s only operational Formula One racing track, located along the expressway. Another influential attraction is the site of the capital region’s second proposed airport, which is closer to the first toll gate from the Greater Noida end. The motorway shares its vicinity with one of the biggest urban campuses of a state-run university. The mega convention centre hosting the annual Auto Expo is also connected to the Yamuna expressway.
In an anticipating decision in regards to a Supreme Court’s ruling, of barring the promoters of Jaypee group from selling or transferring assets, the Reserve Bank of India has ordered banks not to initiate the bankruptcy proceedings against Jaiprakash Associates. Which is the parent group of Jaypee Infratech.
It all started after the IDBI Bank filed to start insolvency proceedings in August against Jaypee Infratech, causing an appeal by homebuyers resulting into the court ruling. The bidding has seen many responses, but eventually all these initial expressions of interest will boil down to a binding offer. Which is a commitment from an interested party to purchase the assets. These bidders, apart from purchasing the assets, are supposed to infuse around Rs 2,000 crore to complete the projects already taken up by Jaypee Infratech.
Earlier in the August, the National Company Law Tribunal (NCLT) Allahabad bench admitted IDBI’s insolvency proceedings against Jaypee Infratech. As Jaypee Group failed to repay its various loans amounting to Rs 526 crore. Anuj Jain has been appointed as the interim resolution professional (IRP) by the NCLT, to carry out proceedings under the Insolvency and Bankruptcy Code. But in September, there came a stay on this process by the Supreme Court, after the appeal by Jaypee Infratech homebuyers.
The company’s saw a total debt of Rs 8,300 crore, with an interest overdue of Rs 1,400 crore on last year’s March. Supreme Court will see a resolution plan from the Jaypee group, in order to ensure a debt restructuring process, enabling the group to meet its obligation.
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