PE into retail pauses in 2020 amid COVID; 2021 looks promising

The Indian retail sector was one of the worst-affected due to COVID-19, which in turn impacted private equity investments into the retail sector in 2020. The year was almost dry for the retail sector in 2020 as against 2019 when it received total inflows of USD 968 million – the highest between 2015 and 2020.

The data on malls deployment in 2020 also reflects the sombre funding scenario, with just five new malls getting added during the year. Pre-COVID-19 data indicated that 54 new malls were to hit the market in 2020. Most of this new supply that failed to be delivered in 2020 has spilled over to 2021.

In 2020, Brookfield Asset Management concluded a portfolio deal of nearly USD 2 billion into RMZ Corp (approx. 12.5 mn. sq. ft. of its total real estate assets) including RMZ Galleria Mall. This was tagged as the largest-ever deal in Indian real estate. Another portfolio deal of USD 1.5 billion between Blackstone and Prestige was expected to get closed in December 2020, but its closure is now pushed to Q1 2021.

While there are various PE investors considering the retail space presently, meaningful investments are likely to take place only once the sector shows signs of bouncing back. 2021 does look promising:

• Blackstone to invest into Prestige Group as part of a portfolio deal covering eight malls
• GIC is looking to invest in Phoenix Mills in 2021
• Warburg-Runwal platform is evaluating various assets in the retail space
• Lakeshore is also evaluating some retail assets

Data indicates that between 2015 and 2019, retail real estate saw a total of USD 2.86 billion in PE investments. Of this, 2019 was the best at about USD 968 million, followed by 2017 which saw total inflows of over USD 890 million. Among the top cities, NCR saw the maximum investments of approx. USD 755 million between 2015-and 2019, followed by MMR with USD 410 million.