Dutch pension fund in talks for mall stake

APG Asset in final leg of discussion to buy stake in Xander's three malls, as further evidence of global invetor interest in Indian realty

Dutch pension fund manager APG Asset Management is in a final round of negotiations to buy a majority stake in three malls of The Xander Group-owned Virtuous Retail, said a source. The deal is expected to be around $325 million (nearly Rs 2,200 crore), said the source.

The three malls are VR Surat, VR Bangalore and an upcoming one in Chennai. Virtuous Retail owns about 5.5 million sq ft of mall properties.

If the deals take place, it would be the largest in retail real estate in recent years. US-based Blackstone bought a mall in Navi Mumbai from L&T Realty for about Rs 1,400 crore early this year and the Carnival multiplex chain bought commercial space, including a mall from L&T Realty, for Rs 1,785 crore.

Mails sent to APG and Xander Group founder Sid Yog, and senior partner Rohan Sikri, did not elicit any response. The source added that Xander was in talks with global investors Blackstone and KKR for the stake sale. When asked, Blackstone and KKR said they did not comment on speculation.

"The fund life of Xander which has invested in the malls is coming to an end. They need an exit," said the source. Xander and APG already share a relationship. In 2014, both formed a $300-million fund to buy leased office assets in India. Interest from global funds is steadily increasing in Indian malls, due to steady rental income and possibility of doing a real estate investment trust (REIT) in these, analysts said. US-based Blackstone which invested a little over $3 billion in Indian real estate, has already bought four malls for a little over Rs 3,000 crore.

Recently, it bought a mall in Coimbatore for Rs 450 crore. It has set up a separate mall company, Nexus. It is looking to buy more land parcels, for developing with the land owners.

Singapore's sovereign fund, GIC, bought 50 per cent at Viviana mall in Thane for Rs 400 crore and bid for Phoenix Mills’ property in Bengaluru.

Oberoi Realty is looking to raise funds for its mall platform and is in talks with investors. Phoenix Mills is also in talks with investors to sell stake in its Bengaluru and Pune malls.

Canada's CPPIB and Australia's Macquarie are also looking to buy malls, the source said. Cities such as Bengaluru, Hyderabad, Delhi, Chennai, Mumbai and Pune are among the top 10 cities with highest retail sales growth forecast between 2015 and 2019 in a JLL Destination Retail 2016 report. India has also emerged at second position in a 2016 Global Retail Development Index by AT Kearney.

"There is little doubt that the country is becoming an attractive destination for global retailers, with further liberalisation of the foreign direct investment policy and creation of a business-friendly environment. The growing potential of the Indian retail market is already manifested by the entry of several marquee global retailers in the past one year," property consultant JLL said recently.

RECENT MALL DEALS

• Blackstone buying Brookfields mall in Coimbatore for Rs 450 cr
   
• GIC buying 50% stake in Viviana Mall in Thane for Rs 50 cr
   
• Blackstone buying a mall from L& T Realty for Rs 1,400 cr
   
• Blackstone buying two malls of Alpha G Corp in North
   
• DLF selling a mall to its subsidiary