Island Star Mall Developers Pvt. Ltd, a strategic investment platform owned by real estate developer The Phoenix Mills Ltd and Canada Pension Plan Investment Board (CPPIB), has acquired a land parcel in Pune for Rs 160 crore ($24 million).
The 1.6 million sq ft plot at Wakad, Pune, is Island Star Mall’s first acquisition. It plans to develop a premium retail space of one million sq ft. “West of Pune is one of the fastest developing residential and commercial hubs, but yet lacks large-scale retail, entertainment, and food and beverage options under one roof. We will develop our second Phoenix MarketCity in the city,” said Atul Ruia, joint managing director of Phoenix Mills. Earlier, the company had built a Phoenix MarketCity in East Pune.
“This acquisition helps deliver on our strategy of expanding our Indian retail portfolio with Phoenix Mills. Pune’s attractive demographic and economic growth profile combined with an undersupplied retail market makes this an ideal location for a high-quality retail and entertainment destination and is well suited to CPPIB’s long-term investment horizon,” said Andrea Orlandi, managing director, head of real estate investments, Europe, CPPIB.
Phoenix Mills and CPPIB had created the platform in April. CPPIB had initially pumped in Rs 724 crore to own a 30% stake in the platform. Subsequently, it plans to invest another Rs 1,600 crore across multiple tranches to own up to 49% in the strategic tie-up.
Of late, many global investors have shown interest and taken exposure in retail assets through platforms and joint ventures.
Blackstone, which has one of the biggest portfolios of commercial real estate in India, has acquired a bunch of retail properties lately. It has also set up a dedicated platform, Nexus Malls, which houses all its retail properties.
Dutch pension fund APG had also bought three retail assets of Virtuous Retail, the retail development arm of The Xander Group, to create a platform.
A recent report by real estate consultancy firm JLL India had said that key leasehold retail assets across the country have come on the PE radar. “A few reasons include well-managed Grade-A malls starting to enjoy better occupancy with rent escalation on the cards, after a lull of six to seven years. Such well-managed assets or entities will attract investor focus.”
The report added that leasehold retail property usually has a higher probability of success as the developer is actively involved in the key functions of mall management, especially tenant management.
“Various new regulations like easing foreign investment for single-brand retailers, longer shopping hours and an updated framework for establishing Real EstateInvestment Trusts (REITs) have attracted the attention of various private equity funds like Blackstone, Xander, GIC, Morgan Stanley, towards the Indian retail real estate sector,” it said, adding that various retail mall developers are also looking to sell their existing retail assets and raise funds for expansion.