| Westerly Retail Private Limited | ||||
| ‘CRISIL A/Stable’ assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL A/Stable' rating to the bank loan facility of Westerly Retail Private Limited (WRPL), a part of Nexus Malls [Blackstone Inc (Blackstone) India retail platform]).
The rating reflects the strategic location of the mall with healthy occupancy, strong operational and management support from the sponsor and healthy debt protection metrics. These strengths are partially offset by its exposure to volatility in interest rates and occupancy, and competition in Navi Mumbai’s retail real estate market. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of WRPL. The company does not have financial fungibility with other companies of the Nexus Malls group.
Non-convertible debentures of Rs 470 crore as on March 31, 2021 (including accrued interest) from related parties, has been treated as neither debt nor equity. This is because the loan is subordinate to bank debt, does not have a fixed repayment schedule and will remain in the business over the medium term. |
Key Rating Drivers & Detailed Description Strengths: Strategic location of the mall with healthy occupancy, leading to stable lease rentals The Seawoods Grand Central mall is part of a transit-oriented development plan and is situated next to the Seawoods railway station. It is strategically located in an attractive catchment area with good connectivity by road to key commercial hubs in Navi Mumbai. It has a total leasable area of 9.76 lakh square feet (sq ft) with occupancy of 92% as of December 2021. It has a track record of around five years with occupancy maintained at over 90% for the past four years. The mall’s strong scale and attractive catchment area led to a healthy mix of anchors, vanilla, and food and beverage tenants. The rating also factors in a well-secured lease structure, with lock-in and lease period of over nine years and in-built revenue escalation clause of 15% for most tenants. Tenant concentration is moderate, with the top 10 tenants occupying around 39% area and contributing to 31% of minimum guaranteed rentals with a weighted average lease expiry of 7.5 years. Also, a portion of the rental is generated through revenue share income.
Strong operational and management support from the sponsor The company benefits from the strong parentage of Blackstone. Blackstone owns and operates one of the largest portfolios of retail real estate in India, spread across diverse micro markets. The sponsor’s experience in asset management and sizeable portfolio of properties in India have resulted in healthy occupancy and steady improvement in rentals across assets. Additionally, the company benefits from the management's proactive approach towards asset maintenance to ensure tenant stickiness and quality, in line with its global portfolio.
Healthy debt protection metrics Steady cash flow from rentals and debt repayment should lead to average debt service coverage ratio (DSCR) of above 1.3 times over the tenure of the debt (15-year tenure). The debt repayment till fiscal 2027 is minimal at 1.5% of total debt. The debt protection metrics are supported by strong liquidity through a debt service reserve account (DSRA) equivalent to three months of debt servicing. Additionally, the debt sanction stipulates Rs 11 crore of cash to be maintained with the bank till fiscal 2023. Security cover on the term loan stands at 1.49 times, based on latest external valuation of the property. Any significant increase in debt will weaken the debt protection metrics and remain a key rating sensitivity factor.
Weaknesses: Exposure to volatile occupancy and interest rates 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. Furthermore, close to 32.6% of the agreements will be due for renewal till fiscal 2025. The company has been able to successfully renew or enter new agreements with tenants for close to 10% of the total leasable area from January 2021. However, the ability of the entity to continue this trend will be closely monitored, especially because of the impact of the Covid-19 pandemic. Moreover, the floating interest rate on debt exposes the company to interest rate risk. Although cash flow will be able to absorb the impact of fluctuations in occupancy and interest rate to some extent, it remains a rating sensitivity factor.
Competition in the Navi Mumbai retail real estate market Although the Seawoods Grand Central mall is one of the city’s largest malls in a prime location, there are other retail assets, albeit smaller in size, and established main streets. Emergence of any competing mall, though unlikely, can also redirect footfalls from the mall and will remain a key monitorable. |
Liquidity: Strong The company maintains DSRA, covering three months of debt obligation, and had cash and equivalent and undrawn bank lines of around Rs 60 crore as on December 31, 2021 including the DSRA. Additionally, the debt sanction stipulates Rs 11 crore of cash to be maintained with the bank till fiscal 2023. |
Outlook: Stable The business and financial risk profiles of WRPL will continue to be supported by stable cash flow, aided by healthy occupancy and rental rates. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company WRPL, incorporated in June 2016 is a part of Nexus Malls, which is the retail arm of Blackstone. The company owns and operates the Seawoods Grand Central mall in Navi Mumbai. The mall has leasable area of 9.76 lakh sq ft. It has a well-diversified clientele and healthy occupancy of 92% as of December 2021. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 09-Mar-2022 in line with the lender-wise facility details as on 09-Mar-2022 received from the rated entity.
Criteria Details
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