Private equity giant Blackstone is in advanced talks with a clutch of city-based developers to acquire South City mall, the largest in eastern India and arguably the most successful in terms of sales and footfalls.
The developers who are part of the South City Group — a consortium of Calcutta’s top builders — are also negotiating the sale of Altair, a luxury residential project in Colombo, with Blackstone. The combined deal size is understood to be in the region of ₹3,500 crore.
Sources say the transaction has yet to be frozen.
If the deal goes through, it will be the largest investment by a private equity player in the Calcutta real estate market, which hasn’t stoked a great deal of interest among institutional investors until now.
“The talks are moving in the right direction,” a source in South City group told The Telegraph, confirming the size of the projected deal value. However, he cautioned that it could take some time to close the transaction.
Blackstone, which is India’s largest commercial real estate owner, did not comment on the ongoing talks. The American firm, which has its headquarters at Park Avenue in New York, is a global leader in real estate with $325 billion capital under management.
The private equity firm is the world’s largest alternative asset manager with over $1 trillion in assets under management. It was founded in 1985 as a mergers and acquisitions firm by Peter G. Peterson and Stephen A. Schwarzman, who had previously worked together at Lehman Brothers.
In India, Blackstone is also a sponsor of Nexus Select Trust, a real estate investment trust (REIT), which is the largest mall operator in the country.
South City Projects Ltd, the company which built the mall in 2008 adjacent to the high-rise residential complex bearing the same name, is co-owned by some of the top builders such as Shrachi Group, Merlin Group, Park Chambers Group, Emami Group, Jugal Kishore Khetawat, and Rajendra Kumar Bachhawat.
After a major revamp carried out in 2018, the South City mall, which ranks among the top 10 malls in India, has a gross leasable area of about 800,000 square feet. With service areas and car parks, the mall is spread over 1.1 million square feet. The mall, which has just about 2 per cent vacant area, earned gross revenues of ₹1,300 per square foot in the last financial year.
In contrast, Altair Residences in Colombo, the tallest residential tower in the Sri Lankan capital, has been struggling to sell apartments due to the economic slowdown that gripped the island nation after it went through political and financial turmoil a couple of years ago.
The South City group has invested close to ₹300 million in the Altair project, which is the largest overseas bet made by Calcutta’s realtors. Work on the project began in 2011.
Real estate circles say that marquee funds such as Blackstone have a wealth of experience in managing different classes of real estate assets across geographies, and possess deep pockets. This enables them to hold on to projects longer than other real estate developers who often run into cash flow problems.
Institutional investors are eager to snap up reputed malls in India which ensure steady rental income over the years and enable them to renegotiate leases every few years.
With India expected to see major growth in the organised retail space, both Nexus Select Trust and Blackstone are on the lookout to expand their portfolios. Neither has a footprint in the East’s retail asset segment.
Earlier this year, a top official from Blackstone Inc had expressed a desire to invest another $17 billion in India. The firm’s assets under management in the country are close to $50 billion, including $30 billion in real estate and $20 billion in private equity (PE) investments.
