CPP Investments to Develop a Retail Mall in India's Financial Hub

Sarah Min of Chief Investment Officer reports CPPIB and Phoenix Mills will develop a retail center in India:

The Canada Pension Plan Investment Board (CPPIB) is developing a shopping center in the affluent Alipore, Kolkata, neighborhood in India, as part of a new joint venture with mall operator Phoenix Mills. 

India is an important destination for CPPIB, the pension fund said last week. The joint venture will fund the mall with about $77 million (C$93 million), which will be invested in tranches into Mindstone Mall Developers Private. 

After construction is completed in the latter part of 2024, CPPIB will take a 49% equity stake in the retail center. The mall in Kolkata, a business hub with several large technology and banking firms, will be designed by international architects. 

“India is one of the most important markets for us in Asia Pacific and a critical part of our long-term strategy,” Hari Krishna, managing director of real estate in India at CPPIB, said in a statement. 

The pension fund has boots on the ground in the country. In 2015, the $411.7 billion (C$497.2 billion) allocator opens its sixth international office in Mumbai, attracted to the country’s demographics. CPPIB also has offices in Hong Kong, London, Luxembourg, New York, and São Paulo. 

India has a growing middle class. It also has among the world’s fastest-growing workforces, which is poised to be the largest internationally in a couple years. Financing for infrastructure, real estate, and public and private equities is set for more growth. 

It’s not the first time CPPIB has partnered up with Phoenix Mills. Multiple ventures with the mall operator over the past several years are now amounting to more than $360 million (INR 26.2 billion). 

In 2017, the two formed a joint venture to develop mixed-use retail developments across India, investing $110 million into Island Star Mall Developers Private Limited (ISMDPL) for the purpose. 

The two parties are extending their commitments to that venture. Among the assets they own are the Phoenix Marketcity in Whitefield, Bangalore. Through ISMDPL, the two are also developing three retail-led, mixed-use developments at Wakad Pune, a suburb in central India; Hebbal Bangalore in the southern part of the country; and Indore in west central India.

CPP Investments put out a press release on this joint venture:

The Phoenix Mills Limited (PML) and Canada Pension Plan Investment Board (CPP Investments) today announced the execution of definitive documents for a new joint venture to develop a regional retail centre in Alipore, Kolkata.

CPP Investments will commit to investing approximately INR 5.6 billion (C$93 million ) in Mindstone Mall Developers Private Ltd. (Mindstone) in tranches, for an ultimate equity stake of 49%. With the funds invested by CPP Investments and PML, Mindstone will develop a retail centre with a potential leasable area of approximately 1 million sq. ft. The target completion date is for the second half of 2024.

Commenting on the Mindstone deal, Mr. Atul Ruia, Chairman at The Phoenix Mills Limited, said:

“We are pleased to grow our strategic relationship with CPP Investments to establish our footprint in Eastern India. This investment bears testament to the attractive long-term prospects of our robust business model of creating destination consumption hubs in key cities of India. With this asset, we are well on track to more than double our operational retail portfolio by 2024. We remain focused on expanding our portfolio by investing in attractive markets and ensuring timely execution of the projects.”

Commenting on the development, Mr. Shishir Shrivastava, Managing Director at The Phoenix Mills Limited, said:

“Alipore, Kolkata is a premium neighbourhood and the site is strategically located, surrounded by a dense catchment of residential and office space. We believe that the site’s proximity to established and developing micro-markets, through extensive and well-developed civic infrastructure, provides us with ample opportunity to cater to the region’s significant untapped consumption potential. We see this will be a mall for the city of Kolkata and a dominant consumption hub for the state of West Bengal. Our mall will be designed by international architects with large and modern open public spaces that will be integral to the customer experience in Kolkata’s largest retail centre. We intend to host the best of domestic and international brands, representing all categories of consumer wallet spend.”

Hari Krishna, Managing Director, Real Estate – India, CPP Investments, said:

“We are pleased to further expand our relationship with The Phoenix Mills, a pioneer in India’s retail property sector, to develop and own a premium retail centre in an underserved market. With this investment, CPP Investments’ equity commitment to multiple ventures with The Phoenix Mills amounts to over INR 26.2 billion. India is one of the most important markets for us in Asia Pacific and a critical part of our long-term strategy. Working alongside reputed development partners such as The Phoenix Mills allows us to expand our portfolio and enhances our ability to deliver solid long-term risk adjusted returns to CPP contributors and beneficiaries.”

Kolkata is a prominent business hub in Eastern India owing to its strategic location and excellent connectivity. It is home to several large manufacturing and information technology companies along with a well-developed banking sector. The city has witnessed a rapid expansion of residential and commercial development in the last decade. Alipore is an established location with various luxurious high-end residential projects and superior infrastructure.

PML and CPP Investments are also extending their commitments to their current joint venture, Island Star Mall Developers Private Limited (ISMDPL). Both parties have agreed to invest collectively up to INR 8 billion (C$133 million) into ISMDPL in tranches as required, in the ratio of their respective shareholdings. The joint venture was formed in 2017 to develop, own and operate retail-led, mixed-use developments across India. Phoenix Marketcity in Whitefield Bangalore served as the seed asset for the alliance. In addition to owning and operating Phoenix Marketcity, ISMDPL owns – and is currently developing – three retail-led, mixed-use developments at Wakad Pune, Hebbal Bangalore and Indore.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At March 31, 2021, the Fund totalled C$497.2 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

About The Phoenix Mills Limited (PML) 

PML (BSE: 503100 | NSE: PHOENIXLTD) is a leading retail mall developer and operator in India and is the pioneer of retail-led, mixed-use developments in India with completed development of over 17.5 million square feet spread across retail, hospitality, commercial, and residential asset classes. The company has an operational retail portfolio of approximately 7.0 million square feet of retail space spread across 9 operational malls in 6 gateway cities of India. The company is further developing 5 malls with over 6.0 million square feet of retail space in 5 gateway cities of India. Besides retail, the company has an operating commercial office portfolio with gross leasable area of 1.5 million square feet and plans to add approximately 5.0 million sq. feet of commercial office across existing retail properties going forward. For more information, please visit www.thephoenixmills.com or follow us on LinkedIn.

Alright, it might seem odd to many of you reading this that CPP Investments is developing a retail mall in India which just suffered a catastrophic outbreak of COVID-19. 

Things are improving on that front. On Monday, Delhi recorded 648 fresh Covid cases, the lowest since March 18, and 86 new deaths. According to a health bulletin, the positivity rate in the national capital also fell below 1%.

Also, India's Serum Institute will increase production of the AstraZeneca-Oxford COVID-19 vaccine by nearly 40 per cent in June, officials said on Monday, in a step toward alleviating a shortage that has worsened the country's battle with the illness.

The increase in vaccine production can't come soon enough. Only about three per cent of India's population is fully vaccinated and about 12 per cent have got the first shot and are waiting for the second. State governments, including in the capital Delhi, have reported an acute shortage of vaccines and some are inoculating only the elderly and front-line workers. 

In a country like India, there are enormous challenges to preventing the spread of coronavirus.

But life is going on and institutional investors like CPP Investments are investing for the long run in India, playing important secular tailwinds.

The world's second most-populous nation is growing fast and so is its middle and upper class.

These are consumers which are looking to spend their gains on cars, clothes, furniture, and services.

When you take the long view, it makes sense to invest in India's malls because there is a growing population, people there are relatively young, they will be shopping online but most of them will be going to the mall to shop directly.

Teaming up with a great local partner like The Phoenix Mills Limited (PML) which CPP Investments is already working with to develop, own and operate retail-led, mixed-use developments across India, pretty much ensures the success of this deal.

The Phoenix Mills is India's largest retail led mixed-use developer:

• The Phoenix Mills Ltd has carved a niche for itself in the Indian real estate sector, be it mega retail malls, entertainment complexes, commercial spaces or hospitality units.

• It's operations span across most aspects of real estate development; planning, execution, marketing, management, maintenance & sales.

• The group has real estate assets in Mumbai, Bengaluru, Chennai, Pune, Raipur, Agra, Indore, Lucknow, Bareilly & Ahmedabad.

You can read more about this company here.

Just to give you an idea about this company and its assets, last year in the middle of a pandemic, it launched a 1 million sqft mall in Lucknow, called Phoenix Palassio:

“Phoenix Palassio is the first mall to become operational of the five that we are developing as a part of our ongoing expansion of over 5 million sqft across Lucknow, Pune, Bengaluru, Indore, and Ahmedabad,” said The Phoenix Mills non-executive chairman Atul Ruia. “This expansion will see us double our mall portfolio by 2024.

The new mall opens as India is gradually emerging from its coronavirus lockdown, meaning many visitors to the property may be entering a mall for the first time in months. With the pandemic in mind, Palassio has launched with minimal contact services, social distancing markers, UV bag screening, sanitized shopping trolleys, multiple convenient hand sanitizer locations and contactless payment points throughout the stores and parking areas.

“We are confident that as the nation unlocks, rigorous compliance with government guidelines and global best practices in retail will set the tone for the sector’s revival,” said Ruia.

The mall opened fully leased, with well-known international and local brands taking space, including some who making their debut in Lucknow.

This mall sounds better than anything we have here in Canada or the US, and I'm basing this on images I've seen on the internet and stories like this (see clip below).

All this to say that CPP Investments has a great local partner in The Phoenix Mills, one which they will build on in years to come as India grows.

And Canadians can now say they are proud owners of malls and mix- use properties in India.  

Pretty cool, the world is a lot smaller than we think. 

Below, take a tour of the Phoenix Palassio, the biggest mall in Lucknow. 

Also, Phoenix Marketcity is the largest shopping mall in India, situated in Kurla, Mumbai. It was also developed by The Phoenix Mills.

Lastly, watch a clip on The City of Seven Wonders, Kolkata. The city is known for its prime business, commercial and financial hub of eastern India . Kolkata is Highly visited city & Tourist hotspot of India. 

I can't wait to see the new mall Pheonix Mills is building in Alipore, Kolkata, it will be beautiful and a great asset for CPP Investments and its beneficiaries.