Canada Pension Plan Investment Board and mall developer The Phoenix Mills have entered into a pact to set up a strategic investment platform for retail real estate properties in India. This is CPPIB’s maiden retail real estate venture in India.
CPPIB will initially own 30% of the platform with an equity commitment of around Rs 724 crore. It plans to invest around Rs 1,600 crore through multiple tranches, to own up to a 49% stake in the platform.
Island Star Mall Developers, a Phoenix Mills’ subsidiary that owns Phoenix MarketCity Bangalore, will serve as the platform for this alliance. The proposed platform will develop, own and operate retail-led mixed-use developments across India.
Based on the committed investment value, pre-money enterprise value of Island Star Mall Developers is pegged at around Rs 2,200 for this investment.
“We are delighted to partner with The Phoenix Mills Limited to launch our first retail real estate venture in India where we will focus on acquiring or developing high-quality retail assets across India’s top cities,” said Andrea Orlandi, MD, Head of Real Estate Investments – Europe, CPPIB. “We believe that India will be a leading source of global growth in the coming decades and that there will continue to be attractive investment opportunities for CPPIB. We look forward to expanding our venture with Phoenix Mills, an experienced retail operator and well-aligned partner.”
CPPIB, the investment management organization of the Canada Pension Plan (CPP) has been investing Indian real estate market through its alliances for some time now. As on December 31, 2016, the CPP Fund totaled $298.1 billion.
Island Star Mall Developers owns Phoenix MarketCity located in Whitefield locality of Bangalore. The mall opened in 2011 and has gross leasable area of around 1 million sq ft. ISMDPL owns and operates a retail mall in Bengaluru known as Phoenix MarketCity, Bangalore. In addition to this property, ISMDPL also has additional development potential to expand the existing mixed-use development. It posted revenue of Rs 160 crore and a net profit of Rs 37.1 crore during the financial year 2015-16.
“This is a landmark transaction for Phoenix Mills and a first-of-its-kind for India’s retail real estate industry. In CPPIB, we have found a like-minded strategic partner that brings significant experience and expertise in creating and managing retail assets across the globe. Jointly, we are committed to creating world-class retail assets to provide an unparalleled shopping experience to consumers,” said Atul Ruia, Joint MD, The Phoenix Mills.
The funds invested will be applied towards acquiring and developing both greenfield assets on newly purchased land banks, as well as existing operating retail assets that are expected to be transformed into highly successful malls. Phoenix Mills will manage all development and operational assets in the platform.
The Phoenix Mills has around 6.0 million square feet of retail space spread across 8 malls in 6 cities of India. The company has retail-led, mixed-use developments in India and has so far developed over 17.5 million sq ft spread across retail, hospitality, commercial, and residential asset classes.
The Indian retail sector is estimated to witness sustained growth over the long term, primarily due to favourable demographics and the rise of the middle class. At the same time, international retailers are increasingly attracted to India as a growth market, which is leading to strong demand for space in high-quality, well-located shopping malls.