The Blackstone Group-backed Nexus Select Trust, India’s maiden retail assets-led Real Estate Investment Trust (REIT), is looking to add new properties spread around 1.5 million sq ft to its portfolio every year for the next 3-5 years hereon, said a top official of the company.
The country’s largest mall platform currently has 17 assets located in dense residential catchments across 14 key cities including Delhi with Select Citywalk, Navi Mumbai with Nexus Seawoods, Bengaluru with Nexus Koramangala, Chandigarh with Nexus Elante, Ahmedabad with Nexus Ahmedabad One among others.
The acquisition-led platform has built this portfolio spanning nearly 10 million sq ft by picking up ready assets over the last 6-7 years.
“Our LTV (loan to value ratio) is 15.5-16% compared to other REITs and that allows us headroom to raise around $0.5 billion (Rs 4,000 crore). Along with this, we can also issue fresh units of the REIT to support these acquisitions,” Dalip Sehgal, CEO, Nexus Select Management, the manager of the REIT, told ET.
Nexus Select Trust has added Delhi’s Select Citywalk to its portfolio with the issue of fresh units to its promoters that will hold around 25% stake in the listed REIT. The share swap, instead of direct payout, is also a tax efficient option for the mall owner looking to roll in the asset in the REIT.
“Our focus for acquisitions will be on consolidating presence in 14 cities we are already present in. We will then consider state capitals and tier II cities where consumption is showing robust growth,” Sehgal said while adding the trust is already working on a few proposals for acquisitions.
According to him, the Indian consumption story is not restricted to 15 cities and tier II cities are also showing healthy consumption levels. The acquisitions to be considered in these tier II cities will be reviewed based on lower cost and superior returns.
Nexus Select Trust is looking to raise Rs 3,200 crore through its Initial Public Offering (IPO) that is scheduled to open on May 9 and close on May 11. The price band for the offer has been fixed at Rs 95-Rs 100 per unit.
The total offer of Rs 3,200 crore comprises of fresh issue of up to Rs 1,400 crore and an offer for sale of up to Rs 1,800 crore. With the IPO size of Rs 3,200 crore, the portfolio’s enterprise value stands at Rs 24,000 crore or $3 billion.
“We are thrilled to launch Nexus Select Trust, India’s first retail-focused REIT. This reaffirms Blackstone’s commitment to India, where we have built a strong presence for more than 15 years and participated in the launch of its first two REITs,” said Chris Heady, chairman Asia Pacific and head of real estate, Blackstone.
This will be Blackstone’s third REIT in the country, including both earlier trusts that housed office properties. Embassy REIT, backed by an institutional investor, was India’s first REIT and made its public market debut in 2019, while Mindspace REIT listed in 2021.
The REIT is planning to distribute 100% of its net distributable cash flow with close to 60% of it in the form of dividends.
Wynford Investments, a portfolio company of Blackstone funds, is the sponsor of the REIT.
The global investor is looking at listing its retail assets’ REIT against the backdrop of rising consumption levels, favourable demographics, and the increasing presence of aspirational brands in the country.
India is one of the fastest growing economies in the world, led by the growing middle-class population and rapid urbanisation. This is driving a robust trend in consumption, which makes up nearly 60% of India’s gross domestic product (GDP).
Morgan Stanley, JP Morgan, Kotak Mahindra Capital, Axis Capital, and BoA ML are the bankers for the proposed public issue.
REIT is an investment trust that owns, manages, and operates income-producing real estate assets. It allows individual investors to make an investment in this platform and earn income in the form of rental yield and appreciation in the capital value of the property.