ICRA assigns provisional AAA rating to Nexus Select Trust

18 Oct 2022 , 08:16 AM

ICRA has given provisional AAA rating to Nexus Select Trust.

This retail REIT will start off with a national portfolio that includes 17 shopping malls, 3 office buildings, 2 hotels, and 1 solar power producing facility.

On September 15, the Securities and Exchange Board of India (SEBI), a capital markets regulator, registered Nexus Select Trust.

The Trust’s sponsor is Wynford Investments Limited, a Blackstone Inc. affiliate, and its investment manager is Nexus Select Mall Management, a company wholly owned by the Blackstone Group.

The sponsor group has agreed to let The Nexus Select Trust buy around 100% of the shares in 18 entities and 50% of the shares in another special purpose vehicle (SPV) from them. Through this, it will hold 17 shopping centres totalling 9.79 million square feet in leasable space, three office buildings totalling 1.34 million square feet in leasable space, two hotels, and one renewable energy asset.

As of June 30, 2022, the portfolio had a solid occupancy level of 93.2% and a reputable tenant base that included notable clients like Reliance Retail, Landmark Group, PVR, Tata & Trent, and Cinepolis, among others. The assessment also favourably takes into account the Trust’s sponsor group’s competence and track record in managing a diversified portfolio in the retail real estate market in India.

The SEBI REIT restrictions, which limit the combined consolidated borrowings and deferred payments for the REIT and its SPVs and so limit the leverage and under-construction portfolio that may be carried by the Trust, are also reassuring to the rating.

ICRA predicts that the trust’s cash situation will be supported by consistent rental income from the underlying assets and minimal operating costs in the leasing industry. The debt servicing requirements will be covered by a healthy fund flow from activities.

Three REIT-structured issuances have been placed in India so far, all of which are in the office space market. These include Brookfield India Real Estate Trust REIT, Mindspace Business Parks REIT, and Embassy Office Parks REIT.

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