In a significant development for India's real estate investment trust (REIT) sector, Blackstone-backed Nexus Select Trust has successfully raised ₹700 crore through a bond issue. This marks the first investment by the International Finance Corporation (IFC), the World Bank Group's private-sector arm, in a retail REIT within the country.
Details of the Bond Issue and IFC's Participation
The bond issue, which has a tenure of 10 years, saw IFC subscribing to approximately ₹250 crore of the total amount. According to Rajesh Deo, Chief Financial Officer of Nexus Select Trust, the proceeds will be primarily utilized to refinance existing debt, specifically a tranche of non-convertible debentures (NCDs) that was due for renewal.
This investment is linked to sustainability targets, including achieving net zero emissions by 2030 and obtaining EDGE-green building certification from IFC for new acquisitions. Imad N Fakhoury, Regional Division Director for South Asia at IFC, emphasized that this sustainability-linked investment supports smarter energy use across Nexus's portfolio and accelerates progress toward sustainable operations by 2030.
Financial Performance and Strategic Growth
Following the refinancing, Nexus's net debt stands at around ₹5,348 crore, resulting in a loan-to-value (LTV) ratio of 18%. The trust reported robust financial results for the October-December quarter, with a 15% year-on-year increase in retail net operating income (NOI) to ₹450 crore. Additionally, Nexus declared its highest quarterly payout since listing, distributing ₹358.60 crore, or ₹2.37 per unit.
Occupancy rates remained strong at 97% for the 11th consecutive quarter. Dalip Sehgal, Executive Director and Chief Executive of Nexus Select Trust, highlighted that categories such as jewellery, beauty and health, and cinema performed well, while fashion also showed growth. He noted that both domestic and international brands are demanding larger stores and expanding their presence, indicating strong market demand.
Expansion Plans and Portfolio Overview
Nexus Select Trust, which went public in 2023, owns a portfolio of 19 Grade-A shopping malls and shopping centres spanning 10.7 million square feet across 15 cities. The portfolio also includes three complementary hotel assets and three office properties. Grade-A malls are characterized by higher-quality assets, strong tenant profiles, better features, and prime locations.
The company is pursuing an aggressive inorganic growth strategy with plans to double its portfolio by 2030. Under this model, Blackstone typically acquires retail assets that are subsequently transferred to Nexus. Recent acquisitions include the MBD Neopolis mall and its attached Radisson Blu Hotel in Ludhiana for ₹490 crore, and the Vega City mall in Bengaluru for ₹913 crore.
Currently, Nexus has an acquisition pipeline of 11 assets across various cities, with four under due diligence. Sehgal added that while demand is strong, supply is likely to be a constraint in the future.
Understanding REITs and the Indian Market
REITs are investment vehicles that own or operate income-generating real estate, allowing investors to earn a share of rental income without directly owning properties. In India, besides Nexus Select Trust, other publicly listed REITs include Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Knowledge Realty Trust.
This bond issue not only reinforces REITs as compelling long-term investment platforms in India but also demonstrates how innovative financing can unlock value in existing assets. The involvement of IFC underscores the growing importance of sustainable practices in the real estate sector and sets a precedent for future investments in this asset class.
