Singapore’s GIC, Phoenix Mills to set up retail properties platform in India

Singapore’s sovereign wealth fund GIC has entered into an agreement with India’s largest mall developer and operator the Phoenix Mills and its subsidiaries to set up a strategic retail-led mixed-use properties development platform in the country.

To begin with, GIC will be picking up around 26% in a certain retail and office assets portfolio owned by Phoenix Mills and some of its subsidiaries. Both the entities may mutually agree to further increase its stake up to 35% within a 12 month period from the closing of the proposed transaction.

“Given the standard due-diligence process and timelines, we hope the transactions would get concluded within the current financial year,” Shishir Shrivastava, MD, Phoenix Mills, told ET.

The company already has a separate alliance with the Canada Pension Plan Investment Board (CPPIB) under Island Star Mall Developers (ISMDPL) to develop, own and operate retail-led mixed-use developments across India.

According to Shrivastava, this alliance with CPPIB currently has one operational mall and three mixed-used projects under development and this will continue to operate separately.

In August, ET had reported the retail-led mixed-use assets developer and operator is eyeing inorganic growth opportunities as the Covid19 pandemic and subsequent lockdowns have made the valuations of probable acquisitions attractive.

The company is looking to acquire at least three malls in the next 9-12 months including a large greenfield project in Kolkata, discussions for which had already started prior to the pandemic, Shrivastava had told ET then.

In August itself, the company had raised Rs 1,100 crore through a Qualified Institutional Placement (QIP) taking its cash position to Rs 1,920 crore. GIC was a key investor in this fund raising too. It had invested Rs 450 crore for 4.33% stake in the company.

Phoenix Mills will contribute its certain retail assets including Phoenix Marketcity Mumbai and Phoenix Marketcity Pune and commercial assets Art Guild House, Phoenix Paragon Plaza and Centrium, Mumbai as a part of the new platform with GIC.

Together these assets, which are held by the PML Subsidiaries, constitute a retail gross leasable area of approximately 2:33 million sq ft and office gross leasing area of around 1.03 million sq ft, totaling 3.36 million sq ft.

Along with Phoenix Mills its subsidiaries, Offbeat Developers, Graceworks Realty and Leisure and Vamona Developers, have jointly signed a non-binding term-sheet with an affiliate of GIC for the proposed transaction.

These assets have reported net operating income of Rs 370 crore for the financial year ended March 2020. Phoenix Mills’ asset contributions are indicatively valued at enterprise value of Rs 5,600 crore to Rs 5,700 crore.

As part of this agreement, GIC will invest in the Phoenix Mills’ subsidiaries by way of a combination of primary infusion and secondary purchase of equity shares. The final details of fund infusion by GIC will be detailed at the time of transaction closure.

The proceeds from the proposed transaction are intended to be utilized as growth capital for further expansion and acquisition of greenfield, brownfield, operational and distressed mall opportunities. Both the entities may consider various options to monetize this platform, including by way of a REIT, over a three to five-year period from the closing of the proposed Transaction.

Phoenix Mills, known for its large format retail malls, is looking at markets including Hyderabad, Chandigarh and Gurgaon for these acquisitions apart from a few micro markets in Mumbai Metropolitan Region and Bengaluru, Shrivastava had told ET in August.

Currently, the company has a total 7 million sq ft gross leasable area across 9 operational malls in 6 cities including Mumbai, Pune, Bengaluru and Chennai. Except Chennai, all other malls of the company have started operations post lifting of lockdown by various state governments. In addition to this, around 5 million sq ft gross leasable area is under development that will take its portfolio to 12 million sq ft by 2023-24.