Phoenix Mills and GIC to develop mixed use retail platform

Phoenix Mills (PML) has inked a non-binding term sheet with an affiliate of Singapore’s sovereign wealth fund, GIC for creating a strategic retail-led mixed-use property development platform, a move that will help India’s largest mall developer and operator improve cash flows and chart better expansion and acquisition plans.

Under the agreement, the Mumbai-based company will contribute retail assets like Phoenix Marketcity (Mumbai) and Phoenix Marketcity (Pune), besides commercial assets Art Guild House, Phoenix Paragon Plaza and Centrium (Mumbai). These assets will be part of the platform and are indicatively valued at an enterprise value of around Rs 5,600-5,700 crore.

Held by PML subsidiaries, these assets constitute a retail gross leasable area (GLA) of around 2:33 million square feet (MSF) and office GLA of around 1.03 MSF, aggregating to GLA of 3.36 MSF with FY20 net operating income of around Rs 370 crore, the red estate developer said in a regulatory filing on Tuesday.

PML subsidiaries — Offbeat Developers (ODP), Graceworks Realty and Leisure (GRLPL) and Vamona Developers (VDPL) have jointly signed a non-binding term-sheet with an affiliate of GIC for formation and development of the platform, which is subject to execution of definitive agreements by the parties and fulfilment of conditions as may be applicable from time to time.

“GIC will invest in PML subsidiaries by way of a combination of primary infusion and secondary purchase of equity shares. Subject to mutually agreed terms and conditions between the parties, GIC will initially acquire an equity stake of 26%. Parties to the transaction may mutually agree for GIC to further increase its stake up to 35% within a 12-month period from the closing of the proposed transaction,” PML said.

Phoenix Mills will utilise the proceeds as growth capital for further expansion and acquisition of greenfield, brownfield, operational and/or distressed mall opportunities. “Parties may consider various options to monetise this platform, including by way of a REIT, over a three to five-year period from the closing of the proposed transaction,” it added.

Market watchers say the deal is positive for Phoenix Mills as cash infusion will result in a reduction of liabilities and improved cash flows. The fund infusion will aid the company in both organic and inorganic expansion in the near and medium term.

Shares of the company on Wednesday rose as much as 13% during the day, before closing at Rs 765.30 per share, a growth of 10.99% from its previous closing.

Phoenix reported a consolidated net loss of Rs 36 crore in Q2 FY21 against a net profit of Rs 66 crore in the year-ago period. Income from operations fell 48% Y-o-Y to Rs 215 crore in the September quarter.