US-based private equity major Blackstone-backed Nexus Select Trust, India’s only listed retail-property real estate investment trust (REIT), is looking to double its assets portfolio to 20 million sq ft in the next five years with an acquisition-led growth strategy, said a top company executive.
Funds to support these acquisitions aimed at augmenting the portfolio will not be a constraint as the trust is open to both options of outright buyouts and share swap with the property owner. It may even consider raising up to a billion dollars for the same.
“In terms of growth, we are looking at both organic and inorganic modes. As our leverage is very low at around 14%, technically we could borrow another billion dollars, if required in the current balance sheet to fund the acquisition. So, to acquire new malls, we have two options of raising debt as well as swapping units for the assets,” Dalip Sehgal, CEO, Nexus Select Trust, told ET.
Nexus started operations in 2015 with acquisition of its first two malls in Ahmedabad and Amritsar. Currently, the Nexus Select Trust portfolio consists of 17 malls with a total spread of nearly 10 million sq ft across 14 cities with 97.3% retail portfolio occupancy.
In 2021, Nexus acquired a majority stake in eight retail properties from Prestige Estates Projects and has made investments of around Rs 100 crore to refurbish and reposition the malls, introduced new brands, and has also rebranded the entire portfolio in southern India.
“If you look at these eight malls, tenant sales and net operating income have grown 50% and 33%, respectively. Our efforts to fix the problem, in terms of investment and marketing, by getting more and better footfalls, better tenants, and realising better value from these assets, seems to be working well,” Sehgal said.
In May 2023, Nexus Select Trust raised over Rs 3,200 crore through its initial public offer and a successful listing, according to Sehgal, has provided the REIT the option to use it to support for future growth with acquisitions.
According to him, the deal pipeline is robust and the REIT is evaluating a select few proposals at present.
“There are a number of A grade malls, some of them are owned by developers, who have one or two malls. And for them, malls business is not core to their overall business…the idea is that over the next five years, we should be able to do what we have been doing on an average over the last five to six years,” he added.
For the quarter ended December, Nexus Select Trust reported revenue of Rs 570 crore and net operating income (NOI) of Rs 420 crore.
“The third quarter sales are our highest-ever tenant sales at almost Rs 3,300 crore, 8% on-year growth and nine-month growth is almost 14% significantly ahead of the market. In December 2023, nine out of the 17 malls achieved their highest-ever tenant sales and in our key markets like Mumbai, Bangalore, Chennai, we clocked higher growth compared to the market,” Sehgal said.
Post a robust comeback in 2022 after the pandemic, growth momentum of India’s retail sector continues to be strong and according to Sehgal, the sector is witnessing a transformation through introduction of newer formats, increasing investment, and entry of new global brands.
India continues to be a preferred market for international brands. Increased consumption, rising institutional participation, strategic partnerships of Indian retail chains, and a supportive regulatory environment are making the country a lucrative destination for global brands.
