Singapore sovereign fund GIC invests Rs 400 crore more in Phoenix Mills’ joint venture

Singapore government’s sovereign wealth fund GIC has invested Rs 400 crore in three subsidiaries of The Phoenix Mills by acquiring equity stake in these entities on a private placement basis, taking its total investment to Rs 1,511 crore.

The investment is the second tranche of investment under the strategic partnership between GIC and India’s largest retail-led mixed-use asset developer and operator to set up a joint venture to develop, own and operate retail-led, mixed-use developments across India.

Last year, GIC had acquired an equity stake of nearly 26.44% in the Phoenix Mills’ Rs 5,500 crore worth select portfolio by investing an aggregate amount of Rs 1,111 crore. With this investment, the Singapore government entity’s stake in each of these subsidiaries has risen to 32.90%, while Phoenix Mills owns the balance 67.10%.

GIC has invested in these subsidiaries through its indirectly wholly owned entity Reco Zinnia Pvt Ltd (RZPL). The Phoenix Mills’ subsidiaries, Offbeat Developers Pvt Ltd (ODPL), Graceworks Realty and Leisure Pvt Ltd (GRLPL) and Vamona Developers Pvt Ltd (VDPL) have received equity investment worth Rs 219 crore, Rs 149 crore and Rs 31 crore, respectively.

The portfolio for this deal includes 3.7-million-sq-ft retail-led mixed-use developments including offices located in the prime consumption centres of Mumbai and Pune. It includes two prime malls--Phoenix Market City, Kurla in Mumbai and Phoenix Market City, Pune in addition to three commercial assets in Mumbai.

Of the total 3.7 million sq ft development portfolio, around 2.3 million sq ft are retail assets and over 1.4 million sq ft are office properties.

These are currently amongst Phoenix’s most prime and well-performing operational assets. The total investment has been made through a combination of primary infusion and secondary purchase of equity shares.

GIC and Phoenix may consider various options to monetize this platform, including a Real Estate Investment Trust (REIT), in three-five years from this transaction's conclusion, the latter had said earlier.

The primary proceeds from the transaction are intended to be utilized by Phoenix’s subsidiaries as growth capital for expansion and acquisition of greenfield, brownfield, operational and or distressed mall opportunities. The secondary proceeds will help Phoenix create a safety net in the near term, fund various under-construction projects and act as war chest for further acquisitions in the medium term.

The investment indicates global investors’ continued interest in Indian mall developments and confidence that retail consumption will rebound once the Covid-19 pandemic is over.

Last year, the Canada Pension Plan Investment Board (CPPIB) had also extended its partnership with Phoenix Mills to invest up to Rs 800 crore into their existing joint venture to develop retail and office properties.

Undeterred by the disruption caused by the Covid19 pandemic over the last two years, retail consumption has bounced back making steady progress in recovery, which is supporting mall developers’ confidence to continue focusing on their plans to develop more malls across major cities of India.

The Phoenix Mills itself will be operationalizing four new large malls in key consumption centers of Pune, Bangalore, Ahmedabad and Indore over the next 12-15 months owing to a robust rebound in retail activity driven by pent-up demand and revenge shopping post the Covid19 pandemic.