DELHI: L&T Realty has put its 1.15-million sq ft mall, a 400,000-sq ft office building, and its under-construction Hyatt Regency hotel in Chandigarh on the block, signalling its intent to exit non-core businesses, said three people with direct knowledge of the development.
The company is looking at a valuation of around Rs 1,200-1,400 crore for the three assets, says a property consultant who is helping the company with the sale.
"They are realising that it is not their core competence and are planning to exit these businesses," said a top executive of a prominent mall chain in Mumbai that is currently in talks with the company to buy the mall. "This is more of a strategic decision," he added. Two senior executives of New Delhi-based mall developers also said L&T Realty has approached them with sellout plans for their mall in Chandigarh.
Spread over 20 acres, the Elante project has been their flagship venture with 1.15 million sq ft of mall space, an office building and a hotel. An L&T spokesperson said the company does not comment on market speculations, but claimed that the Elante mall "has been an outstanding success".
The three top mall developers quoted above agree that the Elante mall, launched barely six months earlier, has already gained popularity in Chandigarh, a city with good discretionary spending. The mall is almost fully leased and boasts of one of the best mix of local and international retailers, including Big Bazaar, Pantaloons, Shoppers Stop, Zara, Mango, Marks & Spencer, among dozens of other prominent brands.
One mall operator based in Delhi who has been doing due diligence on the property says one problem with the mall is that all the stores are leased for nine years with only room for 5% annual hikes and "that makes it a little bit less attractive as against the current norm of revenue-sharing".
The revenue-sharing model has been a hit in India where both mall owners and retailers see each other as partners in growing businesses and not mere tenants. In that model, retailers generally part with a small to significant portion of their revenues to their landlords.
"In a revenue share model, we also benefit from growing consumerism in India and we will take the upside. At Elante, the rentals are fixed for nine years, so there is no upside for us," said a senior executive of the Delhi mall developer quoted above. "Otherwise the mall is excellent and up to international standards. The fixed rentals are the only mistake they have made," she added.