The US private equity fund Blackstone Group has joined hands with Kolkata-based Forum Projects to invest in retail development in eastern India, and the Blackstone Group has just bought a considerable stake in Forum's Bhubaneswar project for a little less than Rs 300 cr.
Blackstone is believed to have bought 74% of the project’s mall portion, covering about 4.2 lakh sqft of 'Forum Esplanade' at Rasulgarh square in the capital city of Odisha. This project, worth Rs 400 cr, is supposed to develop malls and an office tower spread over 10 lakh sqft area. It is expected to house around 150 entities from sectors like retail, food and entertainment.
Forum Projects deputy managing director Vidyut Saraf confirmed the partnership, but refused to share details of the deal. He, however, added: "going forward, the private equity player will cherry-pick commercial real estate projects developed by us in this part of the country for investment."
The realtor is looking to develop malls in Jharkhand, Howrah in West Bengal as well as in the eastern fringes of Kolkata and is expecting to deliver about one million sqft of retail space every year over the next three years.
Blackstone’s partnership with Forum Projects is on lines similar to what it has with the Embassy Group of Bengaluru and Pune-based Panchshil Realty. The two partners are planning to build a platform through which they can collectively own six-seven shopping malls in eastern India over the next six-seven years. Subsequently, they would venture to form a real estate investment trust and raise fund through its listing.
Blackstone's investment will trigger interest in eastern India from other marquee private equity players and sovereign wealth funds who till now have restricted their investments to other regions, a real estate consultant said. "The move also signals that retail infrastructure in the East is gathering steam. This will also lead to the availability of more patient capital, and a lower cost of capital, for retail infrastructure in this part of the country,” said Shobhit Agarwal, ex-managing director for capital markets at JLL.
There is quite a bit of consolidation taking place in the retail space right now, he said. "The GST regime and the relaxing of FDI norms have been welcome regulatory developments. Along with these, the technological integration of shopping malls with ecommerce is helping accelerate retailer access to consumers across the country. Further consolidation will take place in this space as large institutional investors start planning their REIT listings in India," he said.
According to Saraf, "East India has long been under-served with regards to retail, both in terms of presence of retailers, as well as the presence of retail-focused capital. This is likely to change in the next few years, as several retailers have already started to establish and consolidate their presence in the east."