Blackstone-backed Nexus Select Trust raises ₹1,000 cr for acquiring retail malls

Nexus Select Trust, a pure-play retail Real Estate Investment Trust (REIT), has raised non-convertible ₹1,000 crore through debt securities to support inorganic growth strategy. The Blackstone-backed listed REIT intends to use debt capital primarily for acquiring retail malls. The NCDs are now listed on the wholesale debt market of BSE Limited.

As per the company, the NCDs were raised in two tranches of ₹600 crore and ₹400 crore at a coupon rate of 7.70% and is non-amortising with bullet repayment on maturity.

“The issue witnessed strong interest from both new and old investors evidencing a robust investor confidence in REIT’S ability to fuel inorganic growth through debt capital,” it says in a release.

The release highlights that the REIT’s current loan-to-value ratio (LTV) is around 14% which gives it headroom for growth using debt capital.

The NCDs have been ‘CRISIL AAA/Stable’ rating by CRISIL Ratings, citing comfortable LTV ratio of Nexus Select Trust amid low debt levels, strong debt protection metrics, and stable revenue profile of the assets. The low LTV ratio shields investors from the risk of any decline in property prices and its consequent impact on refinancing.

“The consolidated gross debt of Nexus Select Trust was low at ₹4,285 crore as on March 31, 2024 and the total cash and cash equivalents (including mutual fund investments) stood at ₹1,102 crore as on March 31, 2024 (out of which unencumbered was ₹1,062 crore (including mutual fund investments and distribution announced for fourth quarter of fiscal 2024)). Consequently, Nexus Select Trust has a comfortable gross and net LTV ratio of 17% and 14% respectively (as per external valuation dated March 31, 2024),” the rating agency said in its report.

“The REIT is planning to make a completely debt funded acquisition of a retail asset. However, LTV on a net basis is expected to remain comfortable going forward as well. However, significant increase in debt from current levels, in the absence of commensurate cash inflows, will remain a monitorable,” the report noted.

Nexus Select Trust has a portfolio of 17 operational ratail malls across 14 major cities, including Select Citywalk Mall in South Delhi, with a total leasable area of 9.2 square feet (msf), two complementary hotel assets (354 keys), and three office assets (1.3 msf) as of December 31, 2022. The company’s business portfolio includes assets that are mixed-use in nature with complementary hotels and office spaces like Hyatt Regency Chandigarh and Oakwood Residence Whitefield Bangalore (together constituting 2.8% of its gross portfolio market value as of June 30, 2022), which are managed by global hotel operators, Hyatt and Oakwood.

For the financial year 2023-24, the REIT reported a net operating income (NOI) of ₹1,435 crore with NOI margin of 74.8% for the fiscal 2024 (from May 13, 2023). Consumption (consolidated sales done by retailers within the malls) grew 13% during fiscal 2024, while operating performance was healthy with NOI of ₹413 crore and NOI margin of 74.5% during first quarter of the current fiscal as well while consumption grew by 3% during this period. Further, the consolidated committed occupancy for all 17 retail malls in the portfolio remained strong at 97.4% as of June 2024 (97.6% as March 2024).

Last year, the REIT raised ₹1,000 crore in two tranches by issuing NCDs to refinance bank loans at special purpose vehicle (SPV) level. It raised ₹700 crore at a coupon rate of 7.86% per annum payable quarterly for a tenure of 3 years in the first tranche, and another ₹300 crore at 8% per annum payable quarterly for a tenure of 5 years.

The REIT made its debut on the domestic bourses in May last year after raising ₹3,200 crore via initial public offering. It is the fourth REIT to list on the exchanges and the first in retail space as all three listed REITs -- Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust -- are leased office assets. This was also Blackstone’s third REIT listing on the domestic bourses after Embassy Office Parks and Mindspace Business Parks.

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