Consumption recovery this time could be swifter than FY21: Phoenix Mills MD

In a Q&A, Shishir Shrivastava says his firm should start hitting the consumption trajectory of FY20 within 30-40 days

Mall developer and operator Phoenix Mills recently signed two joint ventures with global investors Canada’s CPP Investments and Singapore’s GIC for different plans. With its own funds, and the money put in by the partners, the company plans to almost double the portfolio by FY25 through both greenfield and brownfield development, says the company’s managing director Shishir Shrivastava in an interview with Raghavendra Kamath.

Q) When do you expect full recovery in business? What is your outlook for leasing and rents this financial year?

We have seen swift recovery in our business. Once malls were allowed to reopen in August-September and the government relaxed restriction on operating hours and F&B, we saw a sharp, sustained improvement in consumption. In fact in Q4FY21, consumption across our retail portfolio was at 90 per cent of the same quarter last year. I believe once our malls reopen, recovery in consumption this time could be even swifter compared to FY21 as pace of vaccination picks up and people have more confidence in stepping out. Within 30-40 days we should start hitting the consumption trajectory of FY20.

Q) Are you in talks with retailers on giving them waivers or discounts?

We are sensitive to the impact of the lockdown on our retailer partners’ business. During the previous lockdown, we supported our retailers and they were supportive of us. The fact that we entered commercial negotiations on discounts to rentals only after the malls became operational, with consumption and hence cash flow visibility, enabled us and our retailer partners to take an educated decision and find a mutually win-win solution. Thus, we will pick up any discussions on rental discounts after the restrictions under lockdown-2 are lifted across all locations.

Q) Why did PML go for a new JV with CPPIB when you already had one with them and another with GIC?

PML continues to evaluate opportunities for growth on an ongoing basis. Our alliance with CPP Investments is focused on greenfield and brownfield retail-led developments in India. In the existing alliance, we have one operating retail-led mixed-use development with a sizeable development potential and three under-development large mixed-use projects. We have recently committed to further bring up to Rs 800 crore in tranches as required to fund construction at our various under construction assets in this alliance. Besides the existing alliance, we have also signed definitive documents to partner with CPP Investments in Kolkata for a greenfield retail development. The intent of the alliance with GIC is to exploit potential opportunistic acquisitions in the current environment with a preference for operating malls, distressed malls, brownfield malls and quick-turn around greenfield retail-focused projects.

Q) Recently you said you were looking at new acquisitions. What is driving your plans and ambitions?

The opportunity size for retail in India is huge given that top cities are underserved for quality retail options. We currently have an operational retail mall portfolio of 7 million sq ft. Our current under-construction retail properties will take our retail portfolio to 13 million sq ft by FY25.  We have stated our target to keep on adding at least 1 million sq ft of retail space every year beyond FY24 in key cities of India.  We are keen to add a flagship Phoenix Mall in cities like Hyderabad, Chennai, Mumbai (MMR), NCR, Chandigarh, Jaipur. PML’s strategy of building destination consumption hubs will provide cities with avenues to shop, dine and have a good time with their friends and families.

Q) Do you have any new mall launches planned for FY22? Where are they coming up?

New mall openings have been planned in Indore by the end of FY22, in Ahmedabad in mid-FY23, in Pune and Bengaluru in FY24 and Kolkata in FY25. Our operational retail portfolio by FY24-25 will be about 13 million sq ft while the office portfolio will be around 6.5 million sq ft.

What is the total capex planned by PML in FY22 .apart from JVs, do you have any fundraising plans? If yes, Can you elaborate ?

We had capex on under-construction assets of around Rs. 340 crore in FY21. For FY22, we currently estimate capex to be at around Rs. 500 crore. We have adequate liquidity currently across the group. At PML-level, we have liquidity in excess of Rs 1,800 crore. Further at our alliance with CPPIB, we have over Rs. 550 crore available in liquidity.

Q) Do you feel there are many properties including land parcels and brownfield properties available at lower valuations compared to 2019?

The situation on-ground in retail is similar to what we saw after the global financial crisis where large developers are deferring their plans on committing capital to Retail. Despite short-term challenges, we are extremely confident about our business model and continue to invest for the long term. We look for land parcels that are in the heart of the city; thus not seen prices correct as much for these. Operational retail malls that we like are very few in India. For us to acquire an operating mall, it has to have a specific size, design and located in an attractive catchment. We are evaluating a few operational mall opportunities. We also see some interesting opportunities in brownfield (partly constructed) retail mall assets.

Q) How wellare you geared up for the unlock period?

We are eagerly waiting for the local restrictions to be lifted so that we can welcome our customers once again. Malls are one of the safest places where all the Covid- protocols like social distancing, frequent sanitization can be followed. Temperature checks and Checking the Aarogya Setu app at entrance, sanitization of common touch points, compulsory wearing of masks, density control checks are some of the measures that we have followed at our properties

Q) Can you tell me about the new project in Lower Parel?

Project Rise – the planned development in Lower Parel will be a mixed-use, office-led development that will complement the existing retail and hotel developments on the land parcel.  The proposed development will have a retail chargeable area of approximately 0.2 mn sq ft and office chargeable area of approximately one million sq fr. We are currently in approval stages for this project and will share more details once we are ready to commence construction.