Prozone to buy malls in big cities

It owns malls in Aurangabad and Coimbatore, and is building a 500,000-sq. ft one in Nagpur

Prozone Intu Properties has joined the race to buy malls in India’s prominent cities. It is a joint venture (JV) between Mumbaibased mall developer Prozone and UK’s Intu Properties.

Global private equity majors such as Blackstone, Xander-APG, Singapore’s GIC sovereign fund and the Phoenix Mills- CPPIB alliance have invested in malls and are aggressive on plans to buy more.

BSE-listed Prozone Intu is planning to buy malls in Mumbai, Delhi, Pune and other major cities. “We have already finalised a few deals in Mumbai,” said Nikhil Chaturvedi, managing director.

The firm owns malls in Aurangabad and Coimbatore, and is building a 500,000-sq. ft one in Nagpur, Chaturvedi said.

The mall in Coimbatore is on 500,000 sq. ft and the one in Aurangabad, Maharashtra, has an area of 600,000 sq. ft. Prozone says it is not worried about competition from the likes of Blackstone, which already has a couple of malls. Several are still up for grabs, said Chaturvedi. “We are ready to partner with mall owners. We have enough capital to deploy,” he said, adding that they were looking to buy malls in the range of 400,000 to 500,000 sq. ft.

Blackstone acquired eight malls in the past two years and has a portfolio of over 5 million sq. ft. It is planning to take that to 7 million sq. ft. It has a set up a separate company, Nexus Malls to operate these.

Private Equity firm Xander has formed a JV with Dutch Pension fund APG, and formed Virtuous Retail South Asia, that acquired a mall in Chandigarh last year.

The JV owns properties in Surat and Bengaluru, among other places.

Phoenix Mills, currently the largest among mall owners in India, has a strong portfolio, in this regard, with 6 million sq. ft.

It has tied up with Canada’s CPPIB to acquire more properties. Shobhit Agarwal, managing director at ANB Capital Advisors, said while the country had a decent number of retail malls, not all were performing well.

As a result, quality retail malls have been gaining across the country for some quarters.

“Unlike office spaces, investors are not restricting themselves to the top seven to eight cities. With the economy showing signs of improvement, disposable income has started finding its way into branded goods, leading to better-performing retail malls. Also, expectations from mall owners, especially in tier-II and tier-III cities, are still not very high, allowing good entry points to investors,” he said.

According to real estate consultancy JLL, the year 2017 saw withdrawal of nearly 5 million sq. ft of retail space with the closing of 28 malls.

This mostly happened in NCR region and Mumbai as these markets have significant stock and a considerable percentage were performing below average, it said.

Retail properties saw PE investment of about $750 million in the 2017, almost double the figure in 2016.