Nexus Select Trust to expand mall portfolio amid southern India's retail boom

Established in 2015, Nexus currently boasts 17 malls spanning 10 million square feet. Last May, the company launched a Rs 3,200 crore IPO

Nexus Select Trust, India's inaugural retail real estate investment trust (REIT) backed by Blackstone, is planning further expansion in the southern region of the country, its Chief Operating Officer Jayen Naik told Moneycontrol.

"We are currently in discussions to acquire approximately 1 million square feet (msf) of mall space in one of the southern metro cities, with an official announcement expected in the first quarter of FY25," Naik said. He also spoke about plans to reinforce the company's presence in southern cities by incorporating additional Grade A malls.

While details regarding the impending acquisition remain undisclosed, Nexus aims to add 1.5 msf of retail space to its REIT portfolio annually.

Established in 2015, Nexus boasts of 17 malls spanning 10 msf. Last May, the company launched a Rs 3,200 crore initial public offering (IPO).

Strategic move

Naik outlined the strategic shift towards acquiring brownfield projects, emphasising the company's preparedness to swiftly integrate acquired malls into its structure. With ambitions to double its mall portfolio to 20 msf over the next 3-5 years, Nexus eyes a robust expansion trajectory.

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"Till today, we have been acquiring malls that have completed construction or nearing completion. However, now we also plan to expand our portfolio by considering the acquisition of brownfield projects," Naik added.

Brownfield project in urban planning means land that has been used previously but is lying vacant or unused now.

Tier II and III cities
In Q3 of FY24, Nexus reported a consolidated net profit of Rs 106 crore and distributed Rs 303 crore to unitholders. The company's occupancy rate currently stands at 97 percent across its portfolio, with a re-leasing spread of 24 percent.

Despite a sluggish FY23, Nexus recorded an 8 percent increase in footfalls and a 14 percent rise in consumption in the first nine months of FY24. Notably, tenant sales grew by 8 percent year on year in Q3.

In line with its expansion plans, Nexus is actively exploring opportunities in Tier II and III cities, aligning with rapid urban development in these centres. Naik highlighted the success of their malls in cities like Mangaluru and Bhubaneswar, citing growing consumer aspirations and e-commerce adoption as drivers for expansion in these markets.

Moreover, according to a report by JLL, existing retail stock across the top seven cities offers a potential of around 43-44 msf of REIT-worthy retail assets, underlining the vast scope for growth and investment in the retail real estate sector.

After its IPO last year, the company had said it is looking to raise more debt in FY25 to expand the mall portfolio. Currently, it has a debt ratio of about 14 percent.

In Q3 FY24, cities like Mangaluru, Bengaluru, and Mumbai saw significant leasing and the company is also actively looking at expansion in eastern parts of India, including Bhubaneshwar.

According to Naik, electronic segment and personal care brands like beauty and healthcare are among the brands that have picked up across its retail portfolio.

Currently, the company's total net operating income (NOI) is projected to grow organically by 17 percent to Rs 1,897.1 crore in FY26 from Rs 1,619.8 crore in FY24.