Global buyers roll back into property

Raghavendra Kamath, Business Standard

Mumbai, 15 April 2016

After a long gap, global investors are buying large retail properties for big bucks. 

While investors are buying them to build their portfolios, global retailers are acquiring properties to enter markets such as Mumbai.

A month after Singapore government-owned $100-billion sovereign fund GIC bought 50 per cent stake in Viviana Mall in Thane, on the outskirts of Mumbai, for over Rs 1,000 crore, US-based private equity (PE) firm Blackstone bought a one-million-square-feet mall being developed by L&T Realty in the Seawoods area of Navi Mumbai, said a source.

The deal is expected to be closed between Rs 1,200 crore and Rs 1,500 crore. Blackstone and L&T Realty executives could not be contacted for comments.

Late last year, Blackstone acquired two retail assets of Gurgaon-based developer Alpha G in Amritsar and Ahmedabad for around Rs 800 crore.

“Many global investors are looking to buy good mall properties. It will help them build portfolios in the country and help mall developers consolidate their projects,” said Susil Dungarwal, founder of Beyond Squarefeet Advisory, a mall management company.

Recently, DLF, the country’s largest developer, said it had sold its shopping mall in Saket in Delhi to its subsidiary for Rs 904 crore as part of its strategy to consolidate and monetise non-core assets.

Even big retail chains are not behind.

Swedish furniture firm IKEA is in talks to buy 350,000 square feet (sq ft) in Oberoi Realty in Borivali area of Mumbai for over Rs 900 crore, reports said on Friday.

Recently, IKEA signed up for a 26-acre land parcel in Navi Mumbai’s Turbhe area for Rs 214 crore from Tata group firm Rallis.

IKEA is the first retailer to enter the country after 100 per cent foreign direct investment (FDI) was allowed in single-brand retailing. The company is planning to invest Rs 10,500 crore in real estate to set up 25 stores in Mumbai, National Capital Region, Bengaluru, and Hyderabad.

Last year, it had bought 14-acre land parcel in Hyderabad.

Global buyers roll back into property Phonemaker Apple is said to be in talks to take 30,000 sq ft retail space at plush property Maker Maxity, in Bandra Kurla Complex  in Mumbai. The company is expected to set up one of its flagship stores in the property.

The rents in the complex hover around Rs 320 to Rs 350 per sq ft, one of the highest in Mumbai.   

An email to Apple did not get any response.

On Tuesday, The Times of India reported that Spanish retailer Zara had taken 50,000 sq ft of space in Hutatma Chowk in South Mumbai for Rs 2.5 crore rent.

Its rival H&M is aggressively opening stores. It opened 37,000 sq ft store in Mall of India in Noida recently after opening a store in Ambience Mall, Gurgaon.

It plans to open two stores in Mumbai in autumn.

“We see great potential for expansion and growth, both in metros as well as Tier-II and -III cities in India. Our expansion strategy is to always open at the best business location, and we look at many different options at the same time. The best business location is so important we would rather hold off from opening a new store and wait till the right location becomes available,” an H&M spokesperson told the Business Standard recently.

“Retailers such as Zara are not just anchors, they can be destination stores. Certainly IKEA is a full-day destination store. A larger store allows them to have a more comprehensive product mix and aims for a much larger share of the customer’s wallet than they would otherwise. Also, larger spaces would cost less per square foot, in terms of rental and operating costs,” said Devangshu Dutta, chief executive of Third Eyesight, a retail consultancy.

(Published in Business Standard)