Warbug Pincus, Runwal form JV to build malls

Both partners would inject $200 million each in the form of equity and hold 50 per cent stake each. They plan to raise another $600 million in the form of debt to create a corpus of $1 billion to develop malls across tier-I, II and III cities.

After an over $1-billion investment in Indian malls by US private equity (PE) firm Blackstone, another global PE player Warbug Pincus has charted plans to pump in a similar amount in malls here with its partner the Runwal group, which is based in Mumbai.

Both partners – Warbug and Runwal – would inject $200 million each in the form of equity and hold 50 per cent stake each.

They plan to raise another $600 million in the form of debt to create a corpus of $1 billion to develop malls across tier-I, II and III cities in the country, the duo said on Monday.

Warburg Pincus has partnerships in mall space in China, Vietnam and Indonesia, with entities such as Red Star Macalline, Vincom Retail, and NWP Retail.

This is the first such JV for the PE firm in India.

Banking on rising consumption and large middle class, the likes of Blackstone have bet big on malls here.

Blackstone has bought nine malls in cities such as Mumbai, Pune, Chandigarh, Indore, Bhubaneswar, and Amritsar in the last three years and has a portfolio totalling 5.4 million square feet.

Canada’s CPPIB has formed a partnership with Phoenix Mills to invest and develop malls.

It has put in about Rs 1,600 crore into the venture.

In 2016, Dutch pension fund APG formed a $450 million joint venture (JV) with the Xander group.

The Warbug-Runwal JV would be seeded with several pipeline projects which are currently under development and would also have the option of acquiring some of the Runwal group’s operational retail malls.

“Going forward, the platform would look to acquire both greenfield as well as brownfield projects,” a release from the JV said.

The JV, floated by Runwal-Warbug Pincus, would look to build large destination malls as well as smaller hypermarket and cinema anchored community malls.

The JV would be led by Sanjay Dube, its chief executive officer (CEO). Dube was recently the CEO of Landmark Hospitality (a part of the Dubai-based Landmark group).

Anish Saraf, managing director, Warburg Pincus India, said, “With a growing middle class and expansion of branded retail, shopping malls present a meaningful opportunity to participate in India’s evolving consumption story.”

Sandeep Runwal, managing director of the Runwal group, said that the retail real estate sector is expected to see tremendous growth, driven by lack of community spaces in Indian cities and the growing disposable income.

This is resulting in greater spend on entertainment and branded retail.

The Runwal group already operates four malls in Mumbai with a total leasable area of approximately 2 million square feet.

This includes its flagship R-City mall in Ghatkopar which has a total leasable area of 1.2 million square feet.

Ashutosh Limaye, director and head, Anarock Consulting Services said that on a pan-Indian basis, India’s retail space is set to rise to 120 million square feet over the next three years from 100 million square feet now in Grade A mall space.

According to Limaye, within three years, 20 million square feet of Grade A mall space will get built in India, even as over 50 malls have either shut down or downgraded into mix-use centres in recent times.

The growth is likely to come on the back of organised retail which, is set to double from nine per cent to 18 per cent and online retail, which may grow from three per cent to seven per cent in the next four years.

Limaye said about 50 per cent malls where PE funds have invested in the last three years are in non-metro cities such as Ahmedabad, Amritsar, Bhubaneswar, Chandigarh and Indore.

Photograph: Punit Paranjpe/Reuters