Beyond Crossroads

Piramal Holdings' plans for the swanky new Crossroads 2 in Mumbai's Nariman Point

If Crossroads 2 "" the swanky glass and aluminium-structured complex "" hadn't come up, there might have been a boring car park bang in the middle of Mumbai's central business district, Nariman Point.

Instead, in its place stands a shopping and entertainment mall "" the first of its kind in south Mumbai "" that Piramal Holdings has built and developed in a joint venture with construction major Larsen & Toubro (L&T).

It differs from the first mall that Piramal Holdings set up in Mumbai "" Crossroads at Haji Ali "" five years ago. And not just because it has food courts, a multiplex and an eight-storey basement paid car park. For Piramal Holdings, opening Crossroads 2 has meant a change in the face of the company.

Today, from being a mall management company, Piramal Holdings has turned into a real estate developer. It is now looking at deriving a larger share of its approximately Rs 70 crore turnover from other real estate development (residential and commercial) in this metropolis.

Three years ago, 95 per cent of its revenues came from Crossroads at Haji Ali. "Going forward, our plan would be to look at commercial and residential development as a growth driver," says Rajeev Piramal, vice president-corporate and strategic planning, Piramal Holdings.

That explains why Piramal, son of Ashok and Piramal Holdings' vice-chairperson Urvi Piramal, is as much as much a stranger to the corridors of Crossroads 2 as any other curious visitor.

But then Piramal hasn't really explored the mall since it opened its doors a month back and none of the security guards or other personnel recognises him.

The reason? Piramal Holdings set up Crossroads at Haji Ali in central Mumbai on property it owned and decided the tenant mix by leasing out space to tenants.

Crossroads 2, however, has been built on land that the equal joint venture "" L&T Crossroads Private Limited "" has leased out from the Mumbai Metropolitan and Regional Development Authority (MMRDA). Owing to numerous legal delays in the project, Crossroads 2 has opened its doors two years later than scheduled. To recover costs (L&T-Crossroads has invested

Rs 60-65 crore in the project), Piramal Holdings has sold the entire 80,000 sq ft of retail space to the occupiers. "We didn't really have a choice but to sell space. Financially it made sense, given the delays we faced," admits Rajeev Piramal. Adds Urvi Piramal, "For any project, the key is to get in and get out fast in order to control costs."

The space sold includes roughly 26,000 sq ft for the five-screen multiplex for which Inox Leisure has invested Rs 50 crore. What's more, unlike Crossroads Haji Ali, which houses premium and branded retail outlets, Crossroads 2 is dominated by entertainment and restaurants.

Only a fraction of the space is dedicated to branded retail products. "Each mall has to be localised and cater to the needs of the community around it," says Urvi Piramal.

Piramal Holdings only continues to own alternative floors of the eight-storey underground paid car park for 550-600 cars, the revenue for which is being equally shared with the MMRDA, an arrangement which is currently being re-worked.

Why is the Piramal company going down this route? While part of the reason for the sale is the inordinate delays in the opening of Crossroads 2, the change in focus of the company stems from the lessons the company has learnt from setting up these two malls.

Crossroads at Haji Ali had more than just teething problems. Being the first mall of its kind in Mumbai, it got an unexpected amount of attention.

"It shifted the basic paradigm of a mall by correcting the perception that a large format store was a mall," says a retail expert. The mall "" a refurbished and remodelled building belonging to Piramal Healthcare "" built to cater to the upmarket south Mumbai buyer, boasted of designer boutiques and premium outlets like Shyam Ahuja, J J Valaya, Rohit Bal and Fountainhead bookstore.

Though footfalls on weekdays touched unmanageable figures of 30,000, conversion rates were less than 10 per cent. "There was novelty value but the tenant mix was too high priced," says an industry observer.

Even though Crossroads managed to get the biggest names to set up shop with it, serious shoppers turned away seeing the masses of people flocking to have a look-see.

"A lot of people walked in because they were enthusiastic to see the format, but only a few existing clientele actually bought something," says a boutique owner who moved out a year ago. Most hi-end tenants weren't able to meet costs and moved out. Rentals charged ranged between Rs 200-250 per sq ft, exorbitant in an area where rentals were between Rs 150-180 per sq ft.

Industry sources estimate that in the first two years there was a tenant churn of at least 15-20 per cent. Adds another ex-tenant, "They underestimated the response and overestimated the spending power of the catchment."

It wasn't as if the catchment wasn't exposed to imported branded goods. Just around the corner was Heera Panna, an air-conditioned market selling imported goods at lower prices than Crossroads.

To manage footfalls and encourage serious shoppers, the management decided to experiment with restricted entry on weekends. People walking in were required to produce some form of identification or pay Rs 60 for an entry coupon redeemable against purchase.

It turned out to be the biggest mistake: traffic fell, but Crossroads was unable to shake off the negative publicity. "Even people with serious money to spend stopped coming because they were offended with the plan," says an industry observer.

Crossroads also had trouble managing traffic and infrastructure because the property was so centrally located.

Then there were other issues like the placement of stores and the focus on retail. Like Fountainhead, the book store which is typically an impulse purchase was up on the fourth floor or Groove, a music store was on the third. The luxury brand Swarovski's showroom was next door to a luggage brand outlet.

Instead of having a mix of food, entertainment and retail as it had originally chalked out, Crossroads starting reducing these spaces in order to accommodate a wider range of products.

For instance, Jammin "" the entertainment centre "" is today a third of its original size. "They needed to do a clear mapping of their catchment because retailing is all about profiling the consumer," says a retail expert.

Footfalls at Crossroads Haji Ali have now stabilised at 10,000-12,000 on weekdays and the company claims conversion rates are in the range of 50 per cent.

Several new brands like Hidesign "" the leather accessories brand "" and ITC's Wills Lifestyle have taken up space recently as well. "Today, people are walking in for specific purchases," says Piramal.

Piramal Holdings clearly kept all this in mind while planning Crossroads 2. "We researched the catchment and found that the key requirements in the area are for food and entertainment," says Rajeev Piramal.

"Inox is the anchor and key pull for customers to get in. And since it is on the top floor, one assumes that customers will browse the lower floors and then head up for a movie," says Piramal. Inox expects to breakeven in seven years at an estimated 30 per cent occupancy.

But there are challenges as well. For one, industry experts say that a multiplex cannot be a mall anchor in India due to shortage of software. Then Crossroads 2 will have to deal with two different target audiences "" the Nariman Point office-goer in the morning and the Colaba and Cuffe Parade resident once offices shut in the evening.

With film tickets priced anywhere between Rs 100-200 along with parking at Rs 30 for the first hour and Rs 10 for every subsequent half-hour, hanging out at Crossroads 2 promises to make a dent in a person's wallet.

But now Piramal is looking beyond all this. The company plans to focus on various residential and commercial projects across the city. For instance, it is developing one residential project in north Mumbai and another mill area in the central suburbs.

Clearly, for the time being Rajeev and his mother Urvi Piramal are turning towards greener pastures. But does that mean there will be no more Crossroads? "Right now, unless an opportunity presents itself, we are not looking at malls as a key driver of our growth," he says.