Nexus Select Trust REIT share price target

We attended Nexus Select Trust REIT’s (Nexus) recently held Analyst Meet. The company has unveiled its “Nexus 2.0: Re-imagining the Future” strategy.

The REIT manager of Nexus Select Trust announced the closure of the acquisition of Vega City Mall, a Grade A mall located in south Bengaluru for a total EV of INR 9.1bn (initial purchase cost of INR 8.7bn – funded 100% by debt at 7.7% and balance towards planned capex).

Nexus REIT clocked 18% LTL (like-to-like) consumption growth across its urban consumption centres (malls) in Q2FY24 (similar growth achieved in Q1FY24) with footfalls up 14% YoY and balance growth from high spend per customer. This resulted in Q2FY24 NOI of INR3.5bn which grew 17% YoY.

Nexus REIT clocked 18% LTL (like-to-like) consumption growth across its urban consumption centres (malls) in Q1FY24 with footfalls up 10% YoY and balance growth from high spend per customer. We expect Nexus’ NOI CAGR of 10.4% over FY23-26E to INR18.8bn on expected ramp-up in occupancies in existing assets, annual rental escalations and mark-up of leases that are expiring.

We initiate coverage on Nexus Select Trust (Nexus) REIT with BUY rating based on Mar’24E DCF-based target price of Rs126/share. As of Dec 31, ’22, Nexus owns and operates 17 Grade A urban consumption centres or retail malls with total leasable area of 9.2msf, two complementary hotel assets (354 keys) and three office assets (1.3msf).

Issue Snapshot: Issue Open: May 09 May 11, 2023 Price Band: Rs. 95 100 Issue Size: 3200 cr (Fresh Issue of Rs. 1,400 cr and Offer for Sale of Rs. 1,800 cr) Reservation for: Institutional Investors: up to 75% of the net offer Non-Institutional: at least 25% of the net offer Face Value: NA Bid Size: 150 units and in multiples thereof 100% Book built Issue IPO Note -Nexus Select Trust REIT 09052023

Nexus Select Trust’s portfolio is located in India, the fifth-largest economy in terms of nominal gross domestic product (GDP), the third-largest economy in terms of purchasing power parity (PPP), and the second-most populous country in the world as of June 30, 2022.

IPO note

The Offer comprises of a fresh issue and an Offer for Sale. The fresh issue is of ?14,000 million out of which ?2,500 million would be used for partial or full repayment or prepayment and redemption of certain financial loans of the Asset SPVs and the Investment Entity; ?12,500 million would be used for acquisition of stake and redemption of debt securities in certain Asset SPVs; and the balance would be used for General corporate purposes.

Nexus Select Trust REIT (“Nexus REIT”) is the owner of India’s leading consumption center platform of high-quality assets that serve as essential consumption infrastructure for India’s growing middle class.

The IPO is priced conservatively at a 22% discount to the Net Asset Value (NAV) of the units. Post-IPO, the equity value of the trust will be Rs. 1,51,500 mn. and NAV per unit in relation to the offer price shall be 0.78 at the upper price band.

Well-positioned for strong organic growth through a combination of contractual rent escalations, increased tenant sales leading to higher turnover rentals, re-leasing at higher market rents & lease-up of vacant area.

Nexus select trust Reit portfolio includes 17 best Grade A urban consumption centers which are strategically located across 14 major cities such as Delhi, Navi Mumbai, Bengaluru, Pune, Hyderabad and Chennai.

Nexus REIT has renowned sponsor (Blackstone Real estate fund with global real estate AUM of US$326 billion spread across 1,475 msf of leasable area with global expertise and local knowledge (15 years operating experience in India).

Blackstone group backed Nexus Select Trust (Nexus), an owner of India’s largest mall assets is coming up with a REIT (real estate investment trust) issue to raise Rs. 3,200cr, which opens on 9th May and closes on 11th May 2023. The price band is Rs. 95 - 100 per unit.

The company portfolio has a total 17 best-in-class grade A urban consumption centres
(out of the total 100 grade A assets in India with 90% occupancy) with a total leasable area of 9.2 mn sq ft (adjusted for share of economic interest), 2 complementary hotel assets (354 keys) and 3 office assets (1.3 mn sq ft) as of December 31, 2022.