In the last couple of years the private equity (PE) firms didn’t seem much interested in retail real estate, but this year has seen a turnaround in their perception and the PE firms have again become interested in this space, as shown by their investment figures.
Data from JLL shows that PE players have invested over $724 million in Indian retail realty in the first nine months of 2017 alone, against $846 million invested in two years between 2015 and 2016. These figures include all kinds of investment such as platform and entity-level deals to acquisition of stakes in leading malls across cities.
Aiming to create a portfolio of assets in the expanding Indian market , some of the leading global private funds including Blackstone Group, Canada Pension Plan Investment Board (CPPIB ), APG Asset Management, Xander Group and GIC have started investing in retail sector — diversifying investment portfolios. And this trend is expected to gain ground further.
“Platform deals to form strategic retail partnerships are expected to see more traction in the coming quarters. In these deals, the track record of a developer and their operational processes is the key selection criteria of investors. The global investing partner brings expertise in managing international retail assets and thereby, international best practices. The local partner or the mall developer contributes in terms of local market understanding and leverages existing, strong on-ground teams,” said Ramesh Nair, head, JLL India.
Joint ventures and strategic investment platforms have also been in focus in the last 15 months. Canada Pension Plan Investment Board (CPPIB) and The Phoenix Mills came together under a strategic platform to develop greenfield and brownfield retail-led assets in India. Island Star Mall Developers, a Phoenix Mil ls subsidiary that owns Phoenix Market City Bangalore, will serve as the platform for this tie-up. “Urbanisation, young population and rising proportion of nuclear families will boost urban consumption. Over 70% of consumption growth in the next 15 years is expected from population aged 15-59 years, with increased per capita consumption. PE firms want to tap a part of this rising consumption.
Increasing disposable income levels and rising aspirations is leading to demand for affordable luxury as well as premium products and experiences,” said Shishir Shrivastava, joint MD, Phoenix Mills. Xander Group’s Virtuous Retail (VR) and APG Asset Management have also formed a joint venture Virtuous Retail South Asia (VRSA). The latter recently acquired North Country Mall in Mohali. With this acquisition, VRSA expanded its portfolio that now includes VR Bangalore, VR Surat, North Country Mall and an upcoming mall in Chennai.
“We are actively looking at acquisition proposals for expansion. We will commit capital from Virtuous Retail South Asia for opportunities with right price and location. Over the next 2-3 years, we are likely to pump in more capital and are open to leveraging as well,” said Siddharth Yog, founder, Xander Group. The most recent example is of Blackstone forming an India subsidiary, Nexus Malls, which includes a retail portfolio as well as stakes in successful malls like Seawoods Grand Central, Ahmedabad One, Mall of Amritsar, Elante Mall, Treasure Island Next, Treasure Island Indore and Westend.
According to Shrivastava, even from retailer perspective, both foreign and domestic retailers are looking to considerably expand their footprints in the Indian market which is leading to demand for quality retail space outstripping the supply in the top 10-12 cities in India.