MUMBAI: The world’s largest private equity manager Blackstone Group has entered India’s retailing sector by setting up a fully owned subsidiary Nexus Malls. The new entity will own and manage shopping centres in Asia’s third largest economy with a focus on turning around underperforming malls in the country.
Nexus has already acquired AlphaOne malls in Ahmedabad and Amritsar having a combined 1.3 million sqft retailing space, and has a pipeline of deals to double the portfolio to 2.5 million sqft by the end of the current calendar, people directly aware of the matter said. Globally, Blackstone owns more than 1,000 malls across US, Europe and Asia Pacific. It controls Brixmor, a mall owning platform in the US, and a similar entity called Multi, which operates shopping centres in 14 European markets.
Blackstone is expected to make a formal announcement on Nexus Malls later this week. When contacted, a Blackstone spokesperson declined to comment. Nexus will be Blackstone’s second big bet on commercial real estate after emerging as the country’s leading office landlord.
“The entry of an investor like Blackstone is significant as it could provide liquidity to developers who have built existing malls and help them redeploy capital to build newer assets. It is also a welcome development for brands as it would help in professionalizing broader mall management in the country,” Vivek Kaul, head, Retail Services India, CBRE said. Unlike most other growth markets, India has seen emergence of very few national shopping centre chains barring Atul Ruia’s Phoenix.
Incidentally, global risk investors too have shied away from investing in retailing assets, with the exception of Xander Group that runs Virtuous Retail and operates malls under the VR brand. Bulge-bracket investors like GIC of Singapore and Brookfield Asset management have acquired or built a large portfolio of tenanted office spaces but have been slow on other commercial assets, including retail.
India has around 650 malls with hardly 10% of them running profitable operations. The struggles have prompted several developers to jettison plans for future mall development at a time when global retail brands are speeding up their entry and expansion into the Indian market. This has seen the supply drying up in the recent past with only 1.5 million sqft being added in 2016. Meanwhile, the retailer demand remains upbeat with prominent global players such as Massimo Dutti, Longchamp, Cole Haan, Hunkemoller making inroads into the country while others like Zara, H&M, GAP and Marks & Spencer continue to expand operations, a recent CBRE report said.
Sources said the mandate for Nexus Malls “is to overhaul the shopping patterns and behaviour of consumers” to address the issue of underperforming assets. The initial acquisitions suggest that Blackstone is willing to trigger deals outside the top cities where most shopping centres have struggled despite having the potential to drive consumption growth. Nearly a third of the country’s shopping centres are in tier-II cities and towns.
“Many Indian malls look tired. Mall business is not just about building the box but equally about constant tenant mixing and marketing excitement. While Blackstone is an influential investor, the challenge is in managing these public spaces that are visited by 10 or 12 million people annually,” Darshan Mehta, president, Reliance Brands, said.
Get more of real estate
Subscribe to our mailing list and get interesting real estate stuff updates to your email inbox.