What about the outlook to begin with when it comes to retail REITs landscape because Nexus is the first in retail REITs. So what kind of an opportunity does this present?
Yes, so we are India’s largest consumption centre platform. We have 17 malls across 14 cities, 10 billion square feet. In terms of size and scale, we have 3000 stores, 1000 brands. In terms of footfalls, 130 million footfalls in a year, two times the US population of 65 million coming in and going out of our doors every year. And we have, pre-COVID, we had tenant sales of more than a billion dollars so that is the size and scale of what we have today. The growth story also is very-very strong because as you are aware India’s GDP growth has been significantly better than most other places. Inflation is under control, leading to very strong consumption growth.
Pre-COVID, consumption used to grow at around 10% odd and there is no reason why going forward, we will not see that kind of growth which means that our businesses which are really dependent on consumption, will continue to grow quite strongly even as we go forward.
Speaking of consumption, pre-COVID, you were growing at about 10% to 12%. Now post-COVID, sales growth has been about 30% that could be the pent-up demand as well. Is this growth likely to sustain? And then what is your guidance?
Fair question. I think the fact is that no market can grow at 30% odd year on year. So you are right. You know, the 30% growth that we got last financial year was essentially some of it, not all of it. Some of it obviously was two years of pent-up demand as well. The guidance that we have given is that 8.5% CAGR for the next two years as per the document that we filed. So that is the guidance that we have given, 8.5% CAGR. This is versus, like I said we were growing at around 11% odd.
Tell us also about the partnership and Blackstone’s current shareholding pattern of Nexus?
Pre-IPO, they have about early 60s and post-IPO, they will have about 45%. So they will still be and it is a single sponsor REIT. Blackstone is the sole sponsor of the REIT. So their stake will continue to be significant as we move forward.
And finally, the Nexus portfolio has about 17 malls in 14 cities. Do you plan to add any more malls? What is the expansion plan down the line?
I think if you look at the landscape of what is available in India, there are more than 100 A-grade assets, A-grade malls available in this country. These 100 A-grade the way we define them are malls which have not been strata sold. Strata sold is something like if you have 300 stores in a mall, half of them have been sold to individual investors that becomes an extremely difficult proposition for anybody to acquire a mall. Our entire model is based on acquisition. We do not do any Greenfield so we do not have a development risk in the business model. So for us, if you look at these 100 A-grade malls, we have 17 of them today. If you look at the top four-five developers that is probably 45 odd malls. So another 50-55 malls, 30 million square feet of space is still available for us to look at in terms of acquisition.
Also I am sure you are aware of the fact that the REIT as a product and as a vehicle is very-very lucrative for mall owners to roll in. So essentially what it means is that if you take the case of Select which is one of India’s best performing malls, when they roll into the REIT there is no capital gains tax at the time of rolling in. So you can basically convert your physical asset into financial assets without paying any tax immediately.
So I think that is a big-big advantage and then of course, there is a yield advantage which is that you are getting a post-tax yield of 7.1%. So it becomes very lucrative for mall owners to be able to roll out to the platform. So going forward, my sense is that we will obviously add to the portfolio how much and how we will see as we go along. But just to give you a perspective of what we have done in the past 1.4 million square feet is what we have acquired on an annual basis over the last six-seven years. So there is no reason that we should not be able to do repeat of that kind of performance.
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