After office space, Blackstone to become largest mall owner

The PE firm is in talks with L&T Realty to buy the latter's two malls in Hyderabad

After becoming the largest owner of office properties in the country, US private equity (PE) firm Blackstone could also become the largest owner of malls soon.

Currently, Mumbai-based Phoenix Mills is the largest owner of malls, with an area of six million sq ft, while Blackstone has between four and five million sq ft.

The PE firm is in talks with L&T Realty, the property arm of construction and engineering giant Larsen & Toubro, to buy the latter’s two malls in Hyderabad, which are part of the Hyderabad Metro Rail Project, said a source in the know.

The two malls could fetch Rs 300-400 crore each for L&T Realty, according to sources. L&T is developing three malls in the transit-oriented development in Hyderabad Metro, with a leasable area of 200,000-300,000 sq ft.

The malls are expected to be operational in a year or two.

“Blackstone has intent to buy two malls and talks are on,” said the source.

According to sources, Blackstone is also negotiating four to five mall deals in Delhi, Pune and Kolkata. “It is also looking for deals in tier-II cities such as Jamshedpur and Bhubaneswar to buy malls,” the source said.

When contacted, a spokesperson for Blackstone said: “As a matter of policy, Blackstone does not comment on such media/market speculations.”

L&T Realty Chief Executive Srikant Joshi declined to comment on the matter. Last year, Blackstone bought Seawoods Grand Central in Navi Mumbai from L&T Realty for about Rs 1,400 crore and is in talks with the latter to buy office properties in the same project for Rs 900 crore.

Recently, Blackstone bought the commercial property of Mumbai-based multiplex operator Carnival group in Chandigarh for Rs 2,200 crore. The property has an area of around 1.8 million sq ft, including a one million sq ft mall, a Hyatt Hotel and some office space.

Carnival had bought the property from L&T Realty in 2015 for Rs 1,785 crore.

“Blackstone has been the most aggressive investor in commercial properties. It has been buying properties at 8-10 per cent yield and is probably expecting a good jump in yields when lease agreements come to an end,” said Bappaditya Basu, national director, retail and leisure advisory at JLL India.

Blackstone has set up a separate company Nexus Malls to operate the malls. It owns seven malls. It is also believed to list the mall assets separately as a real estate investment trust.

“We are happy with what we have done since inception. We are not competing with anybody. If the right opportunity comes along, we will consider it,” said Nirzar Jain, senior vice-president (operations), Nexus Malls, when asked whether the company has the ambition of becoming the No. 1 mall developer.

“Right now, we are focusing all our energies on optimising the assets we have acquired by bringing about changes which could transform the retail experience for our patrons,” said Jain.

Nexus has made implemented changes at Mall of Amritsar and Ahmedabad One, which were acquired from Alpha G Corp.

At Mall of Amritsar, it has relocated the entire food court to a different location. It has churned retailers and replaced them with international brands like H&M, Hamley’s etc.

At Ahmedabad One, it refurbished the existing food court, carved out space for fine dining restaurants and signed global retailers.

Blackstone, along with its partners such as Embassy, Panchshil, and K Raheja Corp, owns over 70 million sq ft of office assets in the country.