Nexus Select Trust, which is India’s first retail real estate investment trust (REIT) and is backed by the global private equity major Blackstone, is likely to launch the initial public offer in May to raise Rs 4,000 crore, sources said on April 14.
The sources said that the Updated Draft Offer Document (UDOD) is expected to be filed next week. After the approval of UDOD, the final offer document will be filed, they said.
They said the Nexus Select Trust is expected to hit the capital market in early May with its REIT IPO. The size of the IPO will be around Rs 4,000 crore, of which Rs 1,600 crore would be a primary offering of shares and Rs 2,400 crore of secondary sale.
The draft red herring prospectus (DRHP) for India’s maiden pure-play retail mall REIT offering was filed with the Securities and Exchange Board of India in November.
There are three REITs — Embassy Office Parks, Mindspace Business Parks, and Brookfield India Real Estate Trust — listed on Indian stock exchanges but they are all into leased office assets.
Blackstone, which is the world’s largest real estate investor and India’s biggest corporate landlord, had also participated in the listing of Embassy and Mindspace REITs.
Nexus Select Trust has a portfolio of 17 operational shopping Grade A urban consumption centres with a total leasable area of 9.8 million square feet (msf) valued at around Rs 23,000 crore, two complementary hotel assets (354 keys) and three office assets (1.3 msf) as of June 30, 2022. The assets are located across 14 major cities.
The REIT provides an opportunity to look at doubling the size in the next four to five years, the sources said on April 14, adding 9.8 million sq ft may increase to 20 mn sq ft in that period.
Select City Mall spread across 5 mn sq ft is part of the 9.8 msf.
Blackstone refused to comment.
The Competition Commission of India had on February 13, 2023 approved the acquisition of commercial real estate assets by Nexus Select Trust.
Nexus Mall has Grade A retail space in cities such as Delhi, Chandigarh, Navi Mumbai, Chennai, Bengaluru, and Hyderabad. The draft documents said that the retail portfolio has more than 3,000 stores with an occupancy rate of 95 percent and an annual footfall of more than 130 million.
Real estate experts have welcomed the introduction of the first retail REIT in the country.
“India’s first retail REIT will add sectoral diversity to the REIT market and widen the investment base as well as avenues for investors. The timing of the REIT launch is opportune, with the retail sector showing a strong growth impetus and leasing recovery matching/ surpassing pre-pandemic levels. The real-time purchases and experience offered by brick-and-mortar stores have gained momentum after the pandemic, coupled with high consumer optimism and sentiments for in-store shopping experience would strengthen space take-up by domestic and international retailers. The rising urban population and per capita income, supply chain revamp after the pandemic, and successful brand launches in tier-II, III, and IV markets have led retailers and prominent developers to explore these emerging markets. We expect the continued growth in these cities will drive organized retail market,” said Anshuman Magazine, chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE.
The rebound in the Indian retail market has been exemplary in 2022 which is favourably impacting retail real estate across the country. Buoyed by this growth, developers also plan to add nearly 25 mn sq ft of new mall space across the top 7 cities over the next 4-5 years, ANAROCK Research has said.
Prashant Thakur, senior director and head – Research, ANAROCK Group said all three REITs have performed well and thus given a positive vibe to the investors. Retail REITs also hold similar promises and opportunities in India. The only factor that poses some challenge currently is that the Grade A supply in the retail sector is presently low but given that developers have plans to add more new mall supply over the next 4-5 years, “we may see more retail REITs coming in during the same period of four to five years,” he said.
It is encouraging to see that Nexus Select Trust is breaking new ground by introducing the first retail REIT to the Indian market. With a varied portfolio of marquee shopping malls across key cities of India, the trust is well-positioned to tap into the strong fundamentals of the country's rising consumption story visible in the increasing footfalls in Grade A malls. The retail sector in India has shown remarkable resilience and steady growth, post the pandemic. By investing in a retail REIT, individual and institutional investors can benefit from the stability and long-term potential of the retail sector. At the same time, investors will be able to spread their risk across a diversified portfolio of real estate, said Gagan Randev, Executive Director, India Sotheby's International Realty.
REITs are investment vehicles that own, operate and manage a portfolio of income-generating properties for regular returns. REITable properties in our country will include commercial assets - primarily office spaces - that can generate steady rental income. They will operate like mutual funds or shares. REITs will have to be mandatorily listed on exchanges and traded like securities. Small investors can buy units of REITs from both primary and secondary markets just as they buy shares or mutual funds.
A recent report by CBRE had said that the retail sector leasing is expected to rise by 17-28 percent to touch 5.5-6 million square feet (msf) in 2023, the highest after the 6.8 msf of 2019. The CBRE report titled 2023 India Market Outlook also projected that the gross retail supply would touch about 6 msf in 2023, the highest in the past five years.
"It is expected that primary leasing in newly-completed malls will remain the key driver of retail space demand in 2023," the report added.
The supply situation is expected to improve because several investment-grade projects launched by developers in the previous 1.5 to 2 years are also anticipated to become operational in 2023, the report said.