Rating Rationale
April 11, 2023 | Mumbai
Nexus Select Trust
'Provisional CRISIL AAA/Stable' assigned to Corporate Credit Rating
 
Rating Action
Corporate Credit Rating&Provisional CRISIL AAA/Stable (Assigned)
& A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive ‘Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies' by Securities and Exchange Board of India (SEBI) and April 27, 2021 circular ‘Standardizing and Strengthening Policies on Provisional Rating by Credit Rating Agencies (CRAs) for Debt Instruments’ respectively by SEBI.
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its ‘Provisional CRISIL AAA/Stable’ corporate credit rating to Nexus Select Trust (NxST), sponsored by Wynford Investments Limited (a Blackstone Inc. affiliate). The real estate investment trust (REIT) will acquire stake in 18 special purpose vehicles (SPVs) comprising of 17 retail malls, 3 office spaces, 2 hotels and a solar plant.

 

The rating reflects comfortable loan-to-value (LTV) ratio characterised by low debt levels, strong debt protection metrics, and stable revenue profile of the proposed assets given healthy occupancy level and benefits from tenant and geographical diversification. The strengths are partially offset by competition in the retail real estate market and exposure to volatility in the real estate sector resulting in fluctuations in rental rates and occupancy.

Key Rating Drivers & Detailed Description

Strengths:

 

  • Strong debt protection metrics: Steady cash flow from rentals should lead to comfortable consolidated average debt service coverage ratio (DSCR) for the existing debt at the proposed SPVs. Debt protection metrics are also supported by strong liquidity of Rs 898 crore as on February 28, 2023. The debt at SPVs have long tenure of over 10 years, barring investment entity, Indore Treasure Island Pvt Ltd. Long tenure coupled with low leverage, should support debt protection metrics.

 

  • Stable revenue profile of SPVs proposed to be acquired by the REIT: Around 86% of the total revenue is from 17 retail assets having stable operations with a track record of at least 5 years of rental collection – the consolidated revenue from these assets was around Rs 1,261 crore for the 9 months ended December 31, 2022. These assets enjoy robust occupancy levels, over 95% on an average as of December 2022, and have high upside potential for rentals, given superior asset quality, and favorable location in prime areas within the cities they are situated in.

 

NxST is expected to have total retail area of 9.8 million square feet (sq. ft). The portfolio has a healthy mix of anchors, vanilla, and food and beverage tenants, with top 10 tenants contributing only around 20.2% of gross rentals (as of December 2022). The assets are spread across 14 cities in the country, with the largest asset contributing to 16% of gross rentals (for 9 months ended December 31, 2022). The rating also factors in a well-secured lease structure, with lock-in and lease period of over three years and five years respectively and an in-built revenue escalation clause for most tenants. Also, a portion of the rental is generated through revenue share income.

 

Weaknesses:

  • Competition in the retail real estate market: Although the proposed portfolio of NxST generates steady cash flow from lease rentals supported by healthy occupancy, retail malls may continue to face competition from other retail assets and established high streets. The ability of the REIT to continue to reinvent and remain relevant, to tackle existing and new competition, will remain essential. Any impact on footfalls and consumption and, therefore, rental cash flow at the assets due to competition will remain a key rating sensitivity factor.

 

  • Exposure to volatility in real estate sector: Rental collection, the main source of revenue, is exposed to volatility because of economic downturns, thereby impacting the tenant's business risk profile and, hence, occupancy and rental rates. Ability of the company to renew/enter into agreements at existing or better terms will be a key monitorable. While majority of the tenants are established companies and may continue to occupy the property, any industry shock leading to vacancies may make it difficult to find alternate lessees within the stipulated time. This could adversely impact cash flow, and hence, will be a key rating sensitivity factor.

Rating Sensitivity factors

Downward factors:

  • Decline in the value of the underlying assets or higher-than-expected incremental borrowings, resulting in CRISIL Ratings sensitised LTV ratio of 35% or above on a sustained basis
  • Occupancy level declining below 85% on a sustained basis
  • Acquisition of assets of lower quality affecting portfolio health
  • Any impact on independence of REIT operations due to but not limited to change in sponsorship of the trust or ownership of the REIT manager

Additional disclosures in case of provisional ratings for REIT

The broad details of the assets that are proposed to be held by Nexus REIT are as follows:

 

Select Infrastructure Pvt Ltd (SIPL) owns and operates a retail mall, Select Citywalk, in Delhi. The property has a total leasable area of 5.1 lakh sq. ft, of which 99% was occupied as on December 31, 2022.

 

CSJ Infrastructure Private Limited (CSJ) owns and operates Nexus Elante complex, with a retail mall, an office space and a hotel. Nexus Elante, a retail mall, has a total leasable area of 12.5 lakh sq. ft, of which 99% was occupied as on December 31, 2022. Elante Office, an office space, has a leasable area of 0.9 lakh sq. ft, of which 75% was occupied as on December 31, 2022. It also owns and operates a hotel, consisting of 211 rooms, is run under the Hyatt Regency brand in Chandigarh.

 

Westerly Retail Private Limited (WRPL) owns and operates a retail mall, Nexus Seawoods, in Navi Mumbai. The property has a total leasable area of 9.7 lakh sq. ft, of which 99% was occupied as on December 31, 2022.

 

Euthoria Developers Private Limited (EDPL) owns and operates two retail malls, Nexus Ahmedabad One in Ahmedabad and Nexus Amritsar in Amritsar. Nexus Ahmedabad One has a total leasable area of 8.8 lakh sq. ft, of which 96% was occupied as on December 31, 2022. Nexus Amritsar has a total leasable area of 5.4 lakh sq. ft, of which 97% was occupied as on December 31, 2022.

 

Nexus Hyderabad Retail Private Limited (NHRPL) owns and operates two retail malls, Nexus Hyderabad in Hyderabad and Nexus Koramangala in Bengaluru. Nexus Hyderabad has a total leasable area of 8.3 lakh sq. ft, of which 99% was occupied as on December 31, 2022. Nexus Koramangala has a total leasable area of 3.0 lakh sq. ft, of which 98% was occupied as on December 31, 2022.

 

Vijaya Productions Private Limited (VPPL) owns and operates Nexus Vijaya complex, with a retail mall and an office space. Nexus Vijaya, a retail mall, has a total leasable area of 6.5 lakh sq. ft, of which 99% was occupied as on December 31, 2022. Vijaya Office, an office space, has a leasable area of 1.9 lakh sq. ft, of which 100% was occupied as on December 31, 2022.

 

Chitrali Properties Private Limited (CPPL) and Daksha Infrastructure Private Limited (DIPL) owns and operates Nexus Westend complex, with a retail mall and an office space. Nexus Westend, a retail mall, has a total leasable area of 4.4 lakh sq. ft, of which 96% was occupied as on December 31, 2022. Westend Icon Offices, an office space, has a leasable area of 9.8 lakh sq. ft, of which 75% was occupied as on December 31, 2022.

 

Safari Retreats Private Limited (SRPL) owns and operates a retail mall, Nexus Esplanade, Bhubaneswar. It has a total leasable area of 4.2 lakh sq. ft, of which 97% was occupied as on December 31, 2022.

 

Nexus Shantiniketan Retail Private Limited (NSRPL) owns and operates a retail mall, Nexus Esplanade, Bhubaneswar. It has a total leasable area of 6.3 lakh sq. ft, of which 97% was occupied as on December 31, 2022.

 

Nexusmalls Whitefield Private Limited (NWPL) owns and operates Nexus Whitefield complex, with a retail mall and a hotel. Nexus Whitefield, a retail mall, has a total leasable area of 3.1 lakh sq. ft, of which 95% was occupied as on December 31, 2022. It also owns and operates a hotel, consisting of 143 rooms, is run under the brand Oakwood Residence in Bengaluru.

 

Nexus Udaipur Retail Private Limited (NURPL) owns and operates a retail mall, Nexus Celebration, Udaipur. It has a total leasable area of 4.0 lakh sq. ft, of which 95% was occupied as on December 31, 2022.

 

Nexus Mangalore Retail Private Limited (NMRPL) owns and operates a retail mall, Fiza by Nexus, Mangaluru. It has a total leasable area of 7.2 lakh sq. ft, of which 72% was occupied as on December 31, 2022.

 

Nexus Mysore Retail Private Limited (NMYRPL) owns and operates a retail mall, Center City, Mysore. It has a total leasable area of 3.3 lakh sq. ft, of which 98% was occupied as on December 31, 2022.

 

Naman Mall Management Company Private Limited (NMMCPL) owns and operates a retail mall, Indore Central, Indore. It has a total leasable area of 2.4 lakh sq. ft, of which 90% was occupied as on December 31, 2022.

 

Indore Treasure Island Private Limited (ITIPL, investment entity with 50% shareholding) owns and operates a retail mall, Treasure Island, Indore. It has a total leasable area of 4.3 lakh sq. ft, of which 97% was occupied as on December 31, 2022.

 

Nexus South Mall Management Private Limited (NSMMPL) provides certain property management and common area maintenance services for some assets of the portfolio.

 

Mamadapur Solar Private Limited (MSPL) owns and operates the Karnataka Solar Park having 15 MW capacity.

Additional disclosures for the provisional rating

The provisional rating is contingent upon occurrence of the following:

  • Listing of the REIT
  • Transfer of the proposed shareholding in asset SPVs to the REIT

 

The ‘provisional’ rating shall be converted into a final rating after receipt of transaction documents duly executed and confirmations on completion of pending steps within 90 days from the date of completion of offer through which the REIT completes its fundraising and issues units.

 

The ‘final’ rating assigned post conversion shall be consistent with the available documents and completed steps. In case of non-completion of steps or non-receipt of the duly executed transaction documents within the specified timelines, the rating committee of CRISIL Ratings may grant an extension of up to another 90 days in line with its policy on provisional ratings.

Rating that would have been assigned in the absence of the pending documentation

In the absence of pending steps/documentation considered while assigning the provisional rating as mentioned above, CRISIL Ratings would not have assigned any rating.

Risks associated with the provisional rating:

The 'Provisional' prefix indicates that the rating is contingent on occurrence of certain steps or execution of certain documents by the issuer, as applicable. If the documents received and/or completion of steps deviate significantly from the expectations, CRISIL Ratings may take an appropriate action, including placing the rating on watch or changing the rating/outlook, depending on the status of progress on a case to case basis. In the absence of the pending steps / documentation, the rating on the instrument would not have been assigned ab initio.

About the trust

NxST is registered as an irrevocable trust under the Indian Trust Act, 1882, and as a REIT with SEBI’s REIT Regulations, 2014, as amended. NxST is sponsored by Wynford Investments Limited (a Blackstone Inc. affiliate). It is proposed to have 17 retail malls, 3 office spaces and 2 hotels and a solar plant.

Key Financial Indicators*

Particulars Unit 2022 2021
Operating income Rs crore NA NA
Profit after tax (PAT) Rs crore NA NA
PAT margin % NA NA
Adjusted gearing Times NA NA
Interest coverage Times NA NA

*The trust hasn’t been formed and the public listing is yet to happen

Any other information:

CRISIL Ratings has received an undertaking from Nexus REIT stating that key details (portfolio assets, capital structure, aggregate leverage and other key assumptions) of the initial portfolio of the 18 SPVs are in consonance with the details that will be submitted to SEBI.

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of instrument Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
NA NA NA NA NA NA NA NA

Annexure – List of entities consolidated

Names of entities consolidated Extent of consolidation Rationale for consolidation
Select Infrastructure Pvt Ltd Full 100% subsidiary
CSJ Infrastructure Private Limited Full 100% subsidiary
Westerly Retail Private Limited Full 100% subsidiary
Euthoria Developers Private Limited Full 100% subsidiary
Nexus Hyderabad Retail Private Limited Full 100% subsidiary
Vijaya Productions Private Limited Full 100% subsidiary
Chitrali Properties Private Limited Full 100% subsidiary
Daksha Infrastructure Private Limited Full 100% subsidiary
Safari Retreats Private Limited Full 100% subsidiary
Nexus Shantiniketan Retail Private Limited Full 100% subsidiary
Nexusmalls Whitefield Private Limited Full 100% subsidiary
Nexus South Mall Management Private Limited Full 100% subsidiary
Mamadapur Solar Private Limited Full 100% subsidiary
Nexus Udaipur Retail Private Limited Full 100% subsidiary
Nexus Mangalore Retail Private Limited Full 100% subsidiary
Nexus Mysore Retail Private Limited Full 100% subsidiary
Naman Mall Management Company Private Limited Full 100% subsidiary
Indore Treasure Island Private Limited To the extent of shareholding Investment entity with 50% shareholding
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Corporate Credit Rating LT 0.0 Provisional CRISIL AAA/Stable   --   --   --   -- --
All amounts are in Rs.Cr.

   

Criteria Details
Links to related criteria
CRISILs rating criteria for REITs and InVITs
CRISILs criteria for rating debt backed by lease rentals of commercial real estate properties
Criteria for rating entities belonging to homogenous groups
CRISILs Criteria for Consolidation

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