REIT: Nexus Select Trust

Published by Sharekhan Education | May 9, 2023

Amit Pathak | Sharekhan Education

India’s largest retail mall platform, Nexus Select Trust, is set to become the country’s first publicly listed consumption center REIT. With a portfolio comprising 17 Grade A urban consumption centers, two complementary hotel assets, and three office assets spread across 14 leading Indian cities, the REIT has a total leasable area of 9.2 msf and 1,044 domestic and international brands with 2,893 stores. Strategically located across 14 leading Indian cities, their assets boast a leasing rate of approximately 96%. The REIT has an issue size of ₹ 3200 Cr, with a price band of ₹ 95-100. The issue will open on Tuesday, 9th May’2023, and close on Thursday, 11th May’2023.

REIT’s issue:

The REIT comprises a Rs 1400 crore fresh issue and up to Rs 1800 crore OFS by existing unitholders. The company will use the proceeds from the fresh issue for the acquisition of stake & redemption of debt securities in certain Asset SPV and repayment of a portion of the existing borrowings. Investors must apply for a minimum of 150 units, with multiples thereafter. After allotment, it will list on the stock exchanges.

India is expected to witness continued demand for quality Grade-A retail real estate assets. As of June 30, 2022, approximately 46.9% of overall retail stock in India is classified as Grade-A. Grade-A asset occupancy at 90.2% exceeds Grade-B assets in this sector.

Growth Prospects:

Nexus REIT’s Sponsor is one of the world’s leading Investment firms Blackstone. The company’s portfolio is well-positioned to capitalize on emerging opportunities in the Indian economy’s consumption growth. Nexus REIT plans to continue its strategy of acquiring, owning, and managing best-in-class retail assets within submarkets that have attractive fundamentals. In addition to acquisitions, they intend to undertake strategic expansions within their existing assets to enhance the value of their portfolio.

The company introduced NexusOne, a centralized app, to promote a unified Nexus brand, enabling consumers to access offers, floor plans, parking spaces, booking systems, and exclusive loyalty programs across all Nexus urban consumption centers.

Key Concerns:

The company’s inability to service debt timely in the future may impact distribution to unit holders. A limited number of tenants contribute significantly to the company’s revenue. Any conditions that impact these tenants may adversely affect the company’s business. If footfalls in its urban consumption centers fall, it would adversely affect its revenues. The REIT has a committed occupancy of 96.2% and 5.7-year WALE (weighted average lease expiry) as of December 31, 2022. Over the last three fiscal years and nine months, it has released ~2.9 msf at average re-leasing spreads of 19.2%. The company will distribute at least 90% of the net distributable cash flows of the Nexus Select Trust as distributions to the unitholders. At the upper price band of Rs 100/unit, the issue is at a Price/NAV of 0.78x, offering a pre-tax yield of ~8%.

Source: SEBI Red Herring Prospectus

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