GIC to Acquire Minority Stake in $733M Phoenix Mills India Portfolio

Indian mall developer Phoenix Mills has secured a second deal with a deep-pocketed global investor in less than a week, this time entering into a strategic partnership with Singapore’s GIC.

The sovereign wealth fund will acquire “a significant minority stake” in a $733 million portfolio of Phoenix Mills’ retail-led mixed-use developments in Mumbai and Pune, GIC said in a Wednesday press release.

The properties, totalling 3.4 million square feet (315,870 square metres) of leasable retail and office space, are among the Indian firm’s best-performing operational assets, said GIC, which previously set up an India retail platform with Phoenix Mills in a deal announced last December.

The latest news comes five days after Mumbai-based Phoenix Mills revealed that it would form a joint venture with the Canada Pension Plan Investment Board (CPPIB) to develop a retail centre in Kolkata.

Confidence in India

Lee Kok Sun, chief investment officer for real estate at GIC, foresees resilient returns from the fund’s newest tie-up with Phoenix Mills.

“GIC has been investing in India for more than a decade and our long-term confidence in the Indian real estate market remains strong,” Lee said.

Under the earlier agreement, the two partners created a retail-led mixed-use platform enabling GIC to invest in Phoenix Mills subsidiaries through a mix of primary infusions and secondary purchases of equity shares. The sovereign fund initially acquired an equity stake of 26 percent and may further increase its stake to up to 35 percent within a year of the closing of the transaction.

As part of the platform, Phoenix Mills contributed Phoenix Marketcity malls in Mumbai and Pune, as well as commercial assets such as Art Guild House, Phoenix Paragon Plaza and Centrium in Mumbai, India’s Mint website reported. The assets constitute a gross leasable retail area of 2.33 million square feet and office space of 1.03 million square feet.

“We are pleased to expand our relationship with GIC, a marquee sovereign wealth fund revered globally,” said Phoenix Mills chairman Atul Ruia. “GIC is a like-minded, long-term partner who shares our vision for creating, owning and managing best-in-class retail and commercial assets.”

Markets Cheer Deals

Last Friday, Phoenix Mills and CPPIB announced that they would develop a retail centre in Kolkata with a potential leasable area of 1 million square feet under a JV called Mindstone Mall Developers Private Ltd.

Fund managers from Canada’s biggest pension plan will commit to investing INR 5.6 billion ($77 million) in Mindstone in tranches, for an ultimate equity stake of 49 percent. The target completion date for the project in Alipore, one of India’s most affluent neighbourhoods, is the second half of 2024.

Back in April 2017, the two partners launched a similarly structured deal in which CPPIB committed INR 7.2 billion for a 30 percent stake in Phoenix Mills’ India retail platform, Island Star Mall Developers. By April 2018, the Canadian investor had upped its total investment to INR 16.62 billion for a 49 percent stake in the platform.

BloombergQuint reported that shares of India-listed Phoenix Mills rose to their highest price in four months in the wake of the latest deals. Analysts at Mumbai-based brokerage Nirmal Bang suggested that Phoenix Mills and its partners might consider various options to monetise their investment platforms, including by way of a REIT.

Real estate investment trusts are gaining traction as an investment vehicle in India after the launch of Brookfield India REIT in February, which followed a pair of Blackstone-backed listings: Embassy Office Parks REIT, which became India’s first real estate investment trust to go public in 2018, and Mindspace Business Parks REIT, which debuted in 2020.