ICRA Assigns a Provisional AAA Rating
ICRA, a Rating agency, has assigned a provisional AAA rating with a solid outlook to India’s maiden retail REIT (Real Estate Investment Trust) Nexus Select Trust, floated by an affiliate of US-based private justice major Blackstone Group.
This retail Real Estate Investment Trust will have a starting portfolio of 3 office spaces, 17 retail malls, 2 hotels and 1 solar power generation plant in the country.
On September 15, Nexus Select Trust received registration from the capital markets regulator of the Securities and Exchange Board of India (SEBI).
The sponsor of this Trust is Wynford Investments Limited; this company was an affiliate of Blackstone Inc.
On the other hand, the investment manager of this Trust is Nexus Select Mall Management, which the Blackstone Group owns.
Nexus Select Trust proposes to obtain about 100% shareholding
The Nexus Select Trust proposes to obtain about 100% shareholding in 18 organizations and 50% stockholder in Special Purpose Vehicle (SPV) from the sponsor group.
Through this, it will own 17 retail malls with a leasable area of 9.78 million sq ft, three office spaces with a leasable area of 1.33 million sq ft, one renewable energy asset and two hotels.
Rajeshwar Burla, Group Head at ICRA, said that the rating of Nexus Select Trust too considers the REIT’s less leverage profile with a debt of 4 times for the year 2023 as per ICRA’s base case reports.
And loan to asset value (LTV) of approx. 22%, which provides financial flexibility to fund future acquisitions.
ICRA
ICRA anticipates the leverage to abide below 25% of loan-to-value based on the Trust’s current business plans, supporting its profile with solid credit.
According to Rajeshwar Burla, the rating derives comfort from the Trust’s diversified portfolio of retail malls in different parts of the country.
With the presence of essential micro-markets in major metro cities and a solid operational track record.
On June 30, 2022, the portfolio exhibited a healthy occupancy level of approx. 93.2% and has a well-known tenant base consisting of marquee clients like Landmark Group, PVR, Reliance Retail, Tata & Trent, Cinepolis, etc.
The rating also positively factors in the experience and track record of the Trust’s sponsor group in managing a varied portfolio in India’s retail real estate market.
Rating also takes comfort from SEBI
The rating also takes comfort from SEBI, Real Estate Investment Trust regulations which stop the aggregate consolidated financing and additional payments for the REIT and its SPVs, limiting the purchase and under-construction portfolio the Trust can take on, Rajeshwar Burla said.
ICRA believes the cash flow position of the Trust will be supported by stable rental income from the underlying benefit and low operational lavishing in the leasing business.
Healthy fund flow from operations will be sufficient to cover the account servicing obligations.
Thus far, India has seen three distributions under the REIT structure, all in the office space sector.
These sectors are consisting Mindspace Business Parks, Embassy Office Parks, and Brookfield India Real Estate Trust REIT.
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