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Photo Credit: Shah Junaid/VCCircle

CPPIB to acquire 49% stake in The Phoenix Mills’ Bangalore asset

22 December, 2016

In a sign of its increasing interest in Indian real estate market, Canadian Pension Plan Investment Board (CPPIB) has agreed to buy up to 49% stake in Phoenix MarketCity, Bangalore—a retail asset owned by Mumbai-based developer The Phonenix Mills Ltd—over a period of three years. 

The development comes soon after VCCircle first reported that the Canadian pension fund is keen to buy into the retail assets of the company.

People privy to the development had told VCCircle that the investor was looking to have a retail play in the country through a tie-up with the developer. 

The retail property is housed under Phoenix Mills’ wholly owned subsidiary Island Star Mall Developers Pvt. Ltd (ISML). “If the transaction is consummated in its entirety, the company’s shareholding in ISML shall stand reduced, but not below 51% of the paid-up equity capital on a fully diluted basis,” Phoenix Mills said in a statement. 

ISML clocked revenues of Rs 164.30 crore and a profit after tax (PAT) of Rs 37.10 crore for FY2015-16. It also said the proceeds would be used by the company for business development and growth purposes. 

Known for its malls such as High Street Phoenix, The Palladium and Phoenix MarketCity, the firm is looking to build more retail assets. In a recent analysts’ conference call, a company spokesperson said it is looking at establishing its presence in new geographies such as Kolkata, Cochin, Indore and Goa by acquiring land parcels to build malls or buying exiting malls under its inorganic growth strategy to expand its portfolio.

The developer has 17.5 million sq ft of assets across residential, commercial, hospitality and retail segments. It has seven malls across six cities and five commercial centres. Its portfolio also includes five residential projects under development and two hotels which are being managed by global operators.

CPPIB is bullish on India

CPPIB, which has invested about $2 billion in Indiasince 2010, has been ramping up its India play over the last couple of years.

Toronto-headquartered CPPIB, which opened its seventh global office and only the second one in Asia in Mumbai last October, has invested in firms like Kotak Mahindra Bank and L&T Infrastructure Development Projects besides forming joint investment platforms with Piramal Enterprises and Shapoorji Pallonji Group.

Last year, it joined a consortium to invest in multiplex operator PVR and later reinvested in the firm. Early this year, it also hiked its holding in Kotak Mahindra Bank.

Besides its direct investments in India, it also invests in third-party PE funds as a limited partner (LP). Its Indian LP portfolio includes investments in Multiples Alternate Asset Management and India Value Fund Advisors.

Globally, CPPIB’s assets under management stood at $278.9 billion with investments across asset classes such as public equities, private equities, bonds, private debt, real estate, infrastructure, agriculture and other areas. Last year, its exposure to debt, infrastructure and real estate grew the fastest among all the private investment classes.

In Indian real estate market, it currently has two joint ventures – one each for residential and commercial segment – with Piramal Fund Management (PFM) and Shapporji Pallanji Group, respectively. It has been able to seal only one deal under each platform so far.

Lure for retail assets

The retail segment of the real estate sector has become a hot favourite for global investors lately. The segment seems to be moving out of a long slump and investors are betting on the consumption story that will further drive the growth of malls in India. 

Blackstone Group, which has one of the biggest pools of commercial assets in India, is now lapping up malls as part of its new strategy. It recently bought a 50% stake in Westend Mall in Pune, marking its fourth asset in the asset class. It had set the ball rolling in the segment when it acquired two properties from North-based developer Alpha G:Corp.

Sovereign wealth fund GIC bought around 50% stake in Viviana Mall from Sheth Developers for around Rs 1,000 crore early this year. 

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CPPIB to acquire 49% stake in The Phoenix Mills’ Bangalore asset

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